Author Topic: FED  (Read 27693 times)

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« Reply #100 on: May 25, 2016, 08:05:58 PM »

Is the Fed Confused? Or is it the Economy, Stupid?
By Victoria Craig  Published May 24, 2016 The Fed  FOXBusiness

Is the U.S. economy back on solid footing? Has Wall Street recovered from the worst start to a new year ever? Will the Federal Reserve raise rates later this year? Three questions with varied answers that depend on whom you ask give insight into the delicate balance the Fed faces of raising interest rates without upsetting the market’s steady, but arguably fragile, move higher.

Minutes from the U.S. central bank’s April meeting contrast sharply with the statement it issued last month ahead of the two-day policy meeting. And somewhere in between lay comments from various Fed officials who sit at opposite ends of the hawk-dove spectrum, and the odds futures markets place on a rate rise within the next two months.

“Throughout the long path toward monetary policy normalization in the U.S., the Federal Reserve has been more optimistic about the pace of economic recovery than have market participants,” David Joy, chief market strategist at Ameriprise Financial said. “The Fed’s anticipated trajectory of the rise in the fed funds rate has been consistently more aggressive than that of the futures market.”

Joy pointed to earlier this year when the central bank backed off its forecast for four rate hikes in 2016 and told markets it expected just two. But Wall Street hasn’t bought that outlook. Fed Funds futures, a tool that measures the market’s view of the likelihood of changes to U.S. monetary policy, show just a 34% chance of a rate rise next month, a 57% chance of at least one hike in July, and 82% odds by December.

While those numbers are higher than the single-digit odds seen before the April meeting minutes were released last week, it’s been somewhat of an uphill battle for the Fed to adequately convince the market it’s serious when it comes to tightening monetary policy. In the last week, a number of high-level Fed officials have taken a more hawkish tone, including New York Fed President William Dudley who said he expects to see second-quarter economic growth of 2% and sees market concerns from abroad as having mostly abated.

More on the Federal Reserve
What Lies Beyond April's Better-than-Expected Housing Data
Dudley: Summer Rate Hike 'Likely,' Expect 2% Growth in 2Q
Fed Flexes Muscle, June Rate Hike Still in Play
Mixed April Jobs Report Lets Fed Wait on Higher Rates
Economists: First-Quarter Weakness Unlikely to Carry Through in 2016
Joy said this increased focus on the Fed’s updated message to the markets is succeeding, but only to a point.

“Given the still widespread impression that the economic recovery remains fragile, the market is still judging the likelihood of two rate hikes this year to be a longshot,” he said. “Although the Fed is not bound by any preset course, it would seem that for two hikes to be a realistic possibility, the first one would need to happen soon.”

He said a June hike might be too soon, though, given overseas risk including the potential for Britain to leave the European Union, and U.S. economic data only recently beginning to firm.

Michael Block, chief strategist at Rhino Trading Partners, said the Fed’s insistence that it will make any decisions on rate hikes based on economic data is an old line that has to go.

“I don’t think they’re primed to hike,” he said. “We can talk about the data being good or bad but the important thing here is that they’re not data dependent. If they were…they would have started raising rates sooner. ..they had their chance on data dependence and they missed it.”

In a Monday research note, Goldman Sachs’ (GS) Global Investment Research Chief Economist Jan Hatz said his team’s confidence in identifying exactly when the Fed will move is low, simply because the central bank’s communication is confusing.

“The FOMC statement on April 27 contained no tangible hint of a move at the next meeting…but then the April 26-27 minutes said that ‘most participants judged that…it would likely be appropriate for the committee to increase the target range for the federal funds rate in June.’ Admittedly, this was qualified by a long list of economic conditions,” he wrote.

He also said he sees a 35% probability that the next rate rise will happen in June, the same odds for July, and 20% in September.

“That means we are quite confident that there will be at least one hike over the next two to three meetings, but at the same time, quite unsure about the specific timing of the hike,” Hatz wrote.

In essence, the Fed’s position on the economy remains that it is continuing on the path to recovery. But if one thing’s for sure, the markets will be keenly focused on Fed Chair Janet Yellen’s remarks on June 6 in Philadelphia for any last-minute clues as to whether the central bank has enough confidence in both the U.S. economy’s and U.S. markets’ ability to handle tighter policy – amid a slew of risks – sooner rather than later

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« Reply #101 on: May 26, 2016, 05:52:31 AM »

Fed just amassing ammo for next recession with summer hike: Forester
Tom DiChristopher   | @tdichristopher
10 Hours Ago
COMMENTSJoin the Discussion

In preparing the market for a summer interest rate hike, the Federal Reserve is actually girding itself for an economic downturn, Forester Value Fund Portfolio Manager Tom Forester, said Wednesday.

Expectations for a move in June or July have ticked up after minutes from the Fed's April meeting showed policymakers are likely to raise rates in June if the economy improves in the second quarter, labor market conditions improve and inflation remains on track to hit the central bank's 2 percent target.

James Bullard, president of the Federal Reserve St. Louis.
Bullard: Don't count on a June Fed hike ... or a press conference
Patrick Harker, president and chief executive officer of the Federal Reserve Bank of Philadelphia.
June interest rate hike appropriate unless data weakens: Fed's Harker
Federal Reserve Chair Janet Yellen.
The case for a July interest rate hike

"We actually think the Fed is really just trying to get ammo for the next recession," Forester told CNBC's "Squawk Box."

The Fed had much more room to cut rates during the recessions that followed the dotcom bubble and 2008 financial crisis because the Fed funds rate was significantly higher, he noted.

"Right now, they're what? Twenty-five, 50 basis points? I mean, you've got no room right now if you do start heading into a recession," he said.

Forester, perhaps best known as one of the only fund managers to eke out positive returns in 2008, said current economic data are mixed. Tuesday's new home sales data were strong, but leading indicators like inventories to sales are "awful," and auto inventory to sales are "back at recession levels," he said.

Forester also believes China remains at risk of a hard landing, as exports and imports are currently contributing little to growth.

A young girl gives the victory sign on a healthy and happy themed subway train is seen on March 5, 2015 in Hangzhou, Zhejiang province of China.
Reasons to be cheerful about China's trade data: Economist
"China did a trillion dollars of new lending in the first quarter, and that got everybody excited and bumped back up. The dollar went down, so emerging markets did a lot better. But now all that stuff is sort of starting to come off again," he said.

At home, he flagged poor retail store earnings as cause for concern, as well.

"We actually think the market could get soft over the next few months," he said

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« Reply #102 on: May 26, 2016, 05:53:48 AM »

Inflation, Or Why Raise Interest Rates
May 25, 2016 7:33 AM ET
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By David Blitzer

The minutes of the Fed's April 26-27 meeting convinced almost everyone that the Fed will raise interest rates at its next meeting in June, but left them wondering why. Most of the subsequent discussion centered on the labor market and how close the economy is to full employment. There was also some whispering about inflation.

The Fed has two sometimes conflicting goals: full employment and low inflation. It defines low inflation as 2%. The definition of full employment is less specific - an unemployment rate in the neighborhood of 4.5-5% seems right. Since 2009, the Fed has moved towards full employment by bringing the unemployment rate down from 10% to 5% currently. It has had less success with inflation, unless you really want price increases of zero to 1% instead of the Fed's 2% target.

Inflation used to be thought of as a monetary phenomenon - the growth rate of the money supply drove the rate of inflation. Despite consistent money growth, inflation remains comatose. The competing inflation theory is a combination of expectations and the Phillips curve. Expectations is the idea that when everyone expects prices to rise, they will push for higher wages and prices; but be satisfied with current wages and prices if they expect stability to continue. The Phillips curve was first suggested in 1958 by A. W. Phillips, a New Zealand economist, who described an inverse relation between inflation and unemployment: when unemployment drops and an economy reaches full employment, inflation tends to rise. While the details of the links among inflation, unemployment and expectations have changed, the links are still there, and the Fed believes that full employment can lead to rising inflation. The FOMC doesn't know how far or fast unemployment can fall before inflation picks up. However, waiting to raise interest rates until inflation is climbing would mean needing to push interest rates up much further and faster. A small step or two in interest rates this year may be prudent risk control

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« Reply #103 on: May 26, 2016, 02:19:10 PM »

Federal Reserve Accidentally Admits It Is Causing Inequality
Tyler Durden's pictureSubmitted by Tyler Durden on 05/25/2016 17:56 -0400

Congressional Budget Office Equity Markets Federal Reserve Great Depression Janet Yellen None St Louis Fed St. Louis Fed

Less than a decade ago, the mere hint that the Fed was either propping up markets or actively pushing them higher was enough to get one branded a conspiracy theorist loon and never again invited to polite conversation. Since then first Bernanke, and then virtually all central bankers both domestic and foreign have admitted that the "wealth effect", a polite way of saying pushing up asset prices, has been their primary goal and function.

And yet, despite this admission, the same central bankers would get strangely defensive any time it was suggested that it was they that also were the driving force for global inequality. That was understandable: if the broader public realized that the middle class was in jeopardy and living standards of the vast majority were collapsing as a result of a few career academics with their finger on the print button, those same academics would become an obvious - and very easy - target, when popular anger finally boiled over as it always has in history whenever the income inequality hit record levels.

Which is why we found it quite surprising to read a report by none other than the St. Louis Fed titled "Are Rising Stock Prices Related to Income Inequality?", which if answered in the affirmative would be an accidental admission that the Fed itself has been instrumental in creating the widest wealth and income gap ever seen in US history (now even greater than the Great Depression).

To our great surprise the answer was "yes."

The full note is below. To members of Congress questioning Janet Yellen the next time she is in the house - please ask her how she would rebut research from her own employees that confirms it is the result of the Fed's policies why America has never had a greater chasm between rich and poor.

Are Rising Stock Prices Related to Income Inequality
Income inequality in the U.S. started to increase in the 1970s, and stock market gains accompanied this increase, according to a recent Economic Synopses essay.
Assistant Vice President and Economist Michael Owyang and Senior Research Associate Hannah Shell noted that increases in stock prices and capital returns may benefit the wealthy more than others, as they have better access to markets. They wrote: “Thus, as stock prices and capital returns increase, the wealthy might benefit more than other individuals earning income from labor.”
The figure below shows stock prices (as measured by the S&P 500 Index) along with the Gini coefficient, which represents a measure of income inequality. (A Gini coefficient of 0 means incomes are perfectly equal, and a coefficient of 1 means incomes are perfectly unequal.)

The authors pointed out that inequality began to rise in the 1970s. The Congressional Budget Office estimated that between 1979 and 2011:
Market income grew an average of 16 percent in the bottom four quintiles.
It grew 56 percent for the 81st through 99th percentiles.
However, it grew 174 percent for the top 1 percent.1
Regarding stock returns, the S&P 500 Index grew from 92 in 1977 to over 1,476 in 2007. By comparison, it grew only 50 percent in the 30 years prior. The authors noted: “As stock prices rise, the gains are disproportionately distributed to the wealthy. Lower- and middle-income families who are also wealth-poor are less likely to expose their savings to the higher risks of equity markets.”
Owyang and Shell concluded: “The increase in income inequality in the 1970s was accompanied, in part, by gains in the stock market. Comovement between stock prices and income inequality results from the fact that gains in the stock market tend to benefit those in the wealthiest portion of the income distribution, who have better access to and higher participation in these asset markets.”
Thank you Fed for making yet another conspiracy theory into unconspiratorial fact.

As for what the direct effects of the Fed's disastrous policies are, the following article by the Guardian may provide some insight: "Inequality is destroying all the markers of adulthood, from home ownership to marriage." But at least it leads to all time highs in the "market

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« Reply #104 on: May 27, 2016, 06:01:07 AM »


Federal Reserve Governor Jerome Powell delivers remarks during a conference at the Brookings Institution in Washington August 3, 2015. REUTERS/Carlos Barria

By Howard Schneider and Lindsay Dunsmuir
WASHINGTON — The U.S. Federal Reserve on Thursday continued to lay the groundwork for an interest rate increase in the next two months, with a senior policymaker saying the economy will likely be ready for such a move "fairly soon."

Federal Reserve Governor Jerome Powell, a voting member of the U.S. central bank's rate-setting committee, said in a speech in Washington that he felt the economy was on a "solid footing" and within reach of the Fed's inflation and employment goals.

But he added that the uncertainty surrounding Britain's June 23 referendum on whether to leave the European Union was an argument in favor of the Fed exercising "caution" as it ponders whether to raise rates at its June 14-15 policy meeting.

The Fed will hold another policy meeting on July 26-27.

Powell, however, struck an overall positive tone about the U.S. economy in an appearance at the Peterson Institute for International Economics, becoming the latest Fed policymaker in recent days to say it may be time to notch rates higher.

The Fed's Washington-based Board of Governors has a decisive role in setting monetary policy, and its members have a permanent vote on the committee that sets the central bank's key federal funds rate.

Powell said he felt that data showing continued job creation and evidence of rising wages were a more important signal about the economy's direction than recent weakness in consumer spending and business investment.

"There are good reasons to think that underlying growth is stronger than these recent readings suggest," Powell said. "If incoming data support these expectations, I would see it as appropriate to continue to gradually raise the federal funds rate."


Powell spoke a day before a scheduled public appearance by Fed Chair Janet Yellen. Yellen's remarks on Friday as well as those in a speech in early June will be closely parsed for clues about the Fed's monetary policy stance going into the June meeting.

After increasing rates in December for the first time in a decade, the Fed has watched tentatively as global markets seesawed and weak growth in China, Japan and Europe threatened to pull the U.S. recovery off track.

But the Fed now regards those risks as "waning," and the minutes from its April policy meeting showed several policymakers keying in on a possible June rate increase.

That has shifted market expectations that had been discounting higher rates until later in the year, with trading in federal funds futures on Thursday implying a 26 percent chance of an increase next month and 56 percent in July.

David Stockton, the Fed's former research director, said on Thursday he felt the only thing holding the central bank back from raising rates in June was the "Brexit" vote.

Though Fed policymakers, including Powell on Thursday, have said they see little broad systemic risk in a British departure from the EU, they still regard it as an international risk at a time when the U.S. economy has been weighed down by poor global demand and a rising dollar.

"Brexit is likely to stay their hand" in June, Stockton said, but "they are on track" for July

- See more at:

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« Reply #105 on: May 27, 2016, 06:04:06 AM »

This may be the tell-tale sign the Fed is about to hike rates
Market fears are being scaled back globally, and it's great news for banks in the U.S. and abroad.
Jon Marino   | @JonMarino
5 Hours Ago
COMMENTSJoin the Discussion

Bank stocks are saying it's more likely that Federal Reserve officials will decide to increase interest rates in a few weeks.

Over the last two weeks, Goldman Sachs, JPMorgan Chase and Wells Fargo saw stock prices appreciate at an accelerated pace compared to that of the S&P 500. That's even factoring in financials' decline Thursday.

It's making some Fed-watchers think the market is finally ready to see rates rise again. Between reassuring data including retail figures and home sales, economists and analysts are yet again revising predictions about what the Federal Open Market Committee will do, and when.

"It's making markets think the Fed can go sooner," Deutsche Bank chief U.S. economist Joe LaVorgna said. "The likelihood of more than one move has increased."

Federal Reserve Chair Janet Yellen
Mary Schwalm | Reuters
Federal Reserve Chair Janet Yellen
It comes at a crucial time for Wall Street. Bank CEOs are practically begging FOMC representatives to lift interest rates for only the second time in nearly a decade; analysts and even Bank of America CEO Brian Moynihan said the company faces difficulty matching targets, raising the prospects of further job cuts if the Fed doesn't follow through with interest rate increases.

Read MoreAssessing Yellen's power to sink the gold rally

There's a lot that has happened since the Fed's April meeting that is likely to change central bankers' minds. The price of oil has rebounded 57 percent from its low point this year. Erik Oja, U.S. banks analyst with S&P Global Market Intelligence, said the rebound could stave off failures of energy companies that have forced Wall Street firms to bolster reserves to offset loan losses.

The year began with most economists expecting at least three, and possibly four, rate hikes for 2016. Market turbulence to kick off 2016 scotched that notion, and the FOMC decided in March and April that it would not hike rates. The prospect of three rate hikes means banks could still benefit on their massive cash balances, which would make them billions of dollars in interest, especially if rates continue to rise.
"We saw that helped in first-quarter earnings," Oja said. The Fed expressing signs of confidence about the U.S. economy via a rate hike bodes well for banks in the long run, he added.

Other indicators seem to support the idea that the FOMC is leaning closer to boosting rates June 15; the U.S. dollar has been rising against other currencies this week, as well. CME Group's FedWatch tool, which tracks the probability of a rate hike, showed a strong increase in sentiment that the central bank will raise its target rate from the current range of 0.25-0.50 percentage points. As of early Thursday, the probability for a June hike was at 30 percent, a sharp increase from just 4 percent a few weeks ago.
Read MoreTrump says he is "not the enemy" of Fed chair

It has been good news for investors in bank stocks in the European Union as well, where banks' share-price gains have topped that of even Wall Street firms in the last two weeks.

Banks including Barclays and the Royal Bank of Scotland watched shares notch double-digit percentage gains over the month of May. As the probability of a Brexit declines — something expected to be an operational and regulatory headache for banks, were it to pass a vote in the U.K. next month — some bank stocks rose this week by as much as 10 percent or more on the other side of the Atlantic.

"Pulling out [of the U.K.] would cause a lot of operational difficulties for banks," Oja said

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« Reply #106 on: May 27, 2016, 07:20:34 AM »

The Fed Has A Problem: Inflation May Hit 3.5% By December Due To Gas Price "Base Effect"
Tyler Durden's pictureSubmitted by Tyler Durden on 05/26/2016 14:57 -0400

China CPI recovery

One of the officially stated reasons why the Fed delayed hiking rates so far, is because inflation in late 2015 and early 2016 has been lower than the Fed's bogey (as long as one does not look at core inflation, or such critical price levels as asking rents and health insurance). And, based at least on the CPI's basket weighing of headline input prices, the Fed may have been right: the main reason for this is that tumbling energy prices have resulted in a sharp drop in gasoline prices at the pump, one of the primary drivers of Headline CPI.

What is left unsaid is that keeping rates low has been a blessing in disguise for the Fed: following the early 2016 market rout, which was the functional tightening equivalent of three rate hikes, Yellen was happy that inflation was low enough to let her get away without a rate hike so far this year.

However, as we approach the anniversary of last year's oil - and gasoline - price lows and the base-effect goes away, the sharp pick up in gas prices is set to have an even sharper upward impact on Consumer Price Inflation. It will also wreak havoc on the Fed's strategy of playing possum and not hiking as long as inflation remained "stubbornly low" because suddenly inflation will be the highest it has been in years.

In short: the Fed suddenly has a problem. Here's why.

As BofA writes in a note today, the recovery in oil prices this year should lift headline CPI inflation, "confirming the transitory nature of the energy drag." What is startling, however, is that assuming BofA's gas price forecast is right, the bank calculates that its baseline forecast is for CPI to rise to 2.4% by year-end 2016 from the current 1.1% reading. This forecast uses futures prices for wholesale gasoline (RBOB) to estimate future energy prices.

Note that 2.4% CPI inflation in December is BofA's base case, based on an all too realistic gas price of $1.77/gallon retail ($1.41 wholesale). According to BofA's "bull case" in which gasoline returns to its historical price of $2.76/gallon ($2.06 wholesale) would more than triple headline inflation from its current 1.1% level to a whopping 3.5%: this would be a shock to the Fed, to inflation expectations, and to the market. It would also force the Fed to hike rates far faster than the market currently expects.

Here is the math:

Futures wholesale prices are set to inch up from $1.64/gallon to $1.65/gallon in June before ending the year at $1.41/gallon, above the December 2015 level of $1.27/gallon. We sensitize our inflation forecast by defining “bull” and “bear” cases for gasoline prices in addition to our baseline. In particular, we use the highest and lowest observed RBOB price over the last twelve months. This means a bull case of $2.06/gallon and bear case of $1.07/gallon wholesale, by year-end, with the shock gradually building over our forecast horizon. $1.41/gallon wholesale would be $2.11/gallon for retail gasoline, assuming a steady wholesale-retail spread of $0.70 (which covers distribution/marketing and taxes). Our “bull” case would be $2.76/gallon retail and the “bear” case would be $1.77/gallon retail.
The impact of the base-effect is so pronounced, that as BofA notes, an extreme bearish scenario is needed for inflation to stall. A far less extreme scenario is needed for inflation to jump dramatically. To wit:

Our analysis shows that there is a clear uptrend in CPI ahead, under most reasonable scenarios (Chart 1). CPI would accelerate to 3.5% yoy under our bull case, and rise to 1.6% under our bear case. Supportive base effects are a key driver. It is only under an extreme bear case (year-end wholesale gasoline price of $0.88/gallon, or retail at $1.58/gallon), that we would see CPI inflation flatten out at 1.1%, all else equal.

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« Reply #107 on: May 28, 2016, 05:57:53 AM »

Yellen: Rate hike probably appropriate in the coming months
Jacob Pramuk   | @jacobpramuk
3 Hours Ago
COMMENTSJoin the Discussion

Federal Reserve Chair Janet Yellen said Friday an interest rate hike is "probably" appropriate in the coming months if economic data improve.

"It's appropriate, and I've said this in the past, I think for the Fed to gradually and cautiously increase our overnight interest rate over time and probably in the coming months, such a move would be appropriate," she said in response to a question at Harvard's Radcliffe Institute for Advanced Study.

Her remarks comes as colleagues on the Fed's policymaking committee have pointed to an increase in the federal funds rate target sooner rather than later. Yellen has expressed caution this year on rates, as inflation lags below the Fed's 2 percent target and global risks persist.

Federal Reserve Chair Janet Yellen speaks at the Radcliffe Institute for Advanced Studies at Harvard University in Cambridge, Massachusetts, U.S. May 27, 2016.
Brian Snyder | Reuters
Federal Reserve Chair Janet Yellen speaks at the Radcliffe Institute for Advanced Studies at Harvard University in Cambridge, Massachusetts, U.S. May 27, 2016.
"The economy is continuing to improve," Yellen said, adding that she sees growth picking up after a sluggish first quarter. Yellen added that oil prices and the dollar are "roughly stabilizing," which would help to push inflation toward the Fed's goal.

The Fed's policymaking committee meets on June 14 and 15. Markets priced in a roughly 28 percent chance of a hike in June and 57 percent in July before Yellen spoke, according to the CME Group. Those chances rose to 34 and 62 percent for June and July, respectively, after her comments.
The Federal Open Market Committee's April meeting minutes released this month showed most policymakers would support a hike in June if economic data improved as expected.

Janet Yellen, chair of the U.S. Federal Reserve
Summer rate hike odds pop after Yellen comments
A woman uses her smartphone as she waits in line to checkout at a Target store
US economy picking up steam—beyond the official data
Federal Reserve Chair Janet Yellen
This may be the tell-tale sign the Fed is about to hike rates
Jerome Powell, Federal Reserver Governor.
Fed's Powell: Rate hike looking appropriate 'fairly soon'

On Thursday, FOMC voters continued to hint a hike may come in the near future. Fed Governor Jerome Powell said an interest rate hike could be appropriate "fairly soon," adding that he supports gradual increases if data underpin forecasts for an improving economy.

Earlier Thursday, St. Louis Fed President James Bullard told reporters he believes markets "read the minutes correctly" when they priced a higher chance of a hike.

Yellen on Friday said the Fed needed to avoid raising rates too quickly, as it could cause a slowdown.

"If we were to raise interest rates too steeply and we were to trigger a downturn or contribute to a downturn, we have limited scope for responding, and it is an important reason for caution," she said.
Aside from her comments on rates, Yellen gave a broader assessment of the U.S. economy. She said it has made "a great deal of progress" in the "slow recovery" since the global financial crisis.

Yellen highlighted improvement in the labor market, saying it has nearly reached a point that most economists would associate with full employment. However, she outlined out some areas of weakness, including wage and productivity growth.

One widely followed market watcher did not think Yellen's comments necessarily meant the Fed will hike in June. DoubleLine Capital's Jeffrey Gundlach said Yellen's remark "doesn't suggest" a hike in June, according to Reuters.

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« Reply #108 on: May 28, 2016, 06:03:21 AM »

US economy picking up steam—beyond the official data
John W. Schoen   | @johnwschoen
3 Hours Ago
COMMENTSJoin the Discussion

Don't look now, but the American economy is doing better — maybe a lot better — than much of the latest data would suggest.
On Friday, the government bumped up its official tally of the total U.S. output of goods and services in the first three months of this year. The latest estimate pegs GDP growth at 0.8 percent, up from the initial report of just 0.5 percent.

The change reflects fresher data showing stronger spending on homebuilding, increased investment by businesses in building up inventories and a smaller headwind from a global slowdown in trade. Corporate profits also picked up better than the initial accounting last month.

All of which is a reminder that these initial reports, despite the precision included in the data tables, are only best guesses.

The Commerce Department's quarterly GDP report is widely watched as the main barometer of economic growth. But tracking the millions of moving parts in an $18 trillion economy is daunting.

Collecting and analyzing all that data takes time, which is why the official reporting process includes multiple revisions that can take years to complete. (The official GDP print for the first quarter of 2002, for example, wasn't finalized until July 30, 2014.)

That's also why most economists rely on other economic data to gauge the overall health of the economy. Based on those other measures, the latest official GDP report looks like it's understating how well the economy is performing.

For starters, businesses are expanding payrolls at a healthy clip, providing a boost to consumer spending. Many of those paychecks are getting bigger, which also helps fuel growth. That increased spending power has produced a strong rebound in retails sales, according to the latest monthly data.

Fewer workers are losing their jobs, a trend that shows up in separate data tracking the number of people signing up for unemployment benefits. That number has fallen to the lowest level in more than four decades.

Look a little closer in the GDP report and those signs of green shoots are there in the Commerce Department's data release Friday. While the media spotlight shines brightest on the single, "headline" GDP number, our government bean counters, in fact, use two separate measures to track how well the American economy is doing.

Gross Domestic Product measures how much we all spend in any given three-month period; consumers, business, investors, governments, importers, exporters, etc.

But there's another measure called Gross Domestic Income, which tracks how much we all earn from all that spending.

In theory, those two numbers should be the same. But the government tally relies on different data sources, which means that in the short term they usually diverge. Sometimes widely.

In the latest data dump, the GDI measure grew by 2.2 percent versus the 0.8 percent GDP headline number.

The difference, according to the Bureau of Economic Analysis website, is the result of " sampling errors, coverage differences, and timing differences with respect to when expenditures and incomes are recorded."

Jerome Powell, Federal Reserver Governor.
Fed's Powell: Rate hike looking appropriate 'fairly soon'
Some economists who rely on the data, though, are left scratching their heads.

"Seeing the gap between GDP and GDI, the statisticians definitely need to take another look at this," Paul Ashworth, an economist at Capital Economics, said in a note to clients.

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« Reply #109 on: May 30, 2016, 05:57:47 AM »

Are interest rates finally about to rise? This is the week we'll find out
If US rates rise, the country that will be most affected – aside from the US itself – is the UK. Here's why
Hamish McRae @TheIndyBusiness 8 hours  ago1 comment
People walk into a meeting of the Board of Governors at the Federal Reserve Getty
There will be one bit of information and one meeting that may change things this week. The first will be the job figures from the US on Friday. The second will be the Opec meeting on Thursday.

The first matters because if job creation in the US is strong – if payrolls increase by more than 200,000 – that makes it a near certainty that the Federal Reserve will raise rates in June. The second matters because, in the unlikely event of there being some sort of agreement between Saudi Arabia and Iran, the oil price will climb further in the autumn.

The key thing to understand about the US Fed is that the next rise in rates is only about timing. It will happen at some stage this year. There may actually be several increases this year, and there is a possibility that these rises will come through faster than people expect.

Carney on interest rates
The country that will be most affected, aside from the US itself, is the UK. That is because the UK is the only other large economy in the developed world with control over its own interest rates that is showing reasonable growth.

Germany has been growing decently, but eurozone interest rates have to be set with regards to the zone as a whole and that precludes any increase. There is a European Central Bank (ECB) meeting this Thursday that will hint about loosening policy, not tightening it. Japan is fearing another dip into recession, driven in part by a stronger yen, and monetary policy is stuck.

So the US will not affect Europe or Japan. But it will clear the way for a post-referendum increase in rates in the UK, perhaps in the autumn, if the vote is to Remain.

If that is the case there will be a short-term bounce in confidence and job creation. (If it were to be Leave, then it is very difficult to know what will happen to interest rates, for this undoubtedly would be a shock.)

Number two: Opec. Saudi Arabia is determined to continue to dominate what happens at Opec. It is by far the largest oil producer, producing around 9.5 million barrels of oil a day.

Why France and Italy could be the next European economies to crash
Iran, now free from sanctions, is ramping up production and hopes to reach 4 million barrels of oil a day, making it the second largest Opec producer. Between them, they pump close to a fifth of the world’s oil.

While Opec no longer has the handle on the global oil price, it is still massively important. It is unlikely that there will be any accord between Saudi Arabia and Iran – but anything short of a complete walkout is positive for the oil price, and a higher oil price would, in turn, reduce the risk of deflation in Europe and Japan.

Two other straightforward things to look for this week, and a more offbeat one. The two obvious ones are the ECB meeting and UK house prices from the Nationwide. What the ECB does (probably very little) will be more interesting than what it thinks. Is Europe really heading back into another downturn, after a decent first quarter? Is Greece really settled? Are there other dangers?

As for UK house prices, the key is whether there is any evidence that the referendum is changing things. At the top end there is stagnation, but the middle and bottom are driving on. House prices are not really a Brexit issue – or, at least, they should not be – but there will be efforts by both sides to make them so.

Will Brexit help or damage British businesses?
Finally something different: Tesla has its annual shareholders meeting on Tuesday in California. This will help focus attention on the transformation taking place in the US on the role electronics and the automotive industry.

One third of all new mobile phone connections in the US are cars. Tesla is accumulating huge amounts of data about how its cars perform, including how they perform when being driven automatically. For example, when on automatic control they hold the centre of a lane much more closely than they do when being driven by a human. 

The automatic industry now realises that this is not just about electric cars; it is about the way all cars are being used – the early stages of seismic change for the entire industry

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« Reply #110 on: May 30, 2016, 08:12:17 PM »

Fed's Bullard says global markets seem well-prepared for summer rate hike
2 Hours Ago
COMMENTSJoin the Discussion
St. Louis Federal Reserve President James Bullard said on Monday global markets appear to be "well-prepared" for a summer interest rate hike from the Fed, although he did not specify a date for the policy move.

"My sense is that markets are well-prepared for a possible rate increase globally, and that this is not too surprising given our liftoff from December and the policy of the committee which has been to try to normalise rates slowly and gradually over time," Bullard told a news conference after speaking at an academic conference in Seoul.

"So my ideal is that if all goes well this will come off very smoothly."

James Bullard, president and CEO of the Federal Reserve Bank of St. Louis.
David Orrell | CNBC
James Bullard, president and CEO of the Federal Reserve Bank of St. Louis.
Bullard added a rebound in U.S. GDP growth seems to be materialising in the second quarter, but reserved his opinion on whether the Fed should hike in June or July for the next policy meeting at the U.S. central bank.

His comments followed revised data on Friday that showed first quarter growth in the U.S. was not as weak as initially expected.

Responding to the GDP data, economists said strong income growth, together with signs the economy was picking up steam in the second quarter, could give the Federal Reserve ammunition to raise interest rates as early as next month.

Answering a question on whether he thought U.S. presidential candidate Donald Trump would bring change to monetary policy if elected, Bullard said the Fed was independent and did not follow any particular political prescription.

Janet Yellen, chair of the U.S. Federal Reserve
Summer rate hike odds pop after Yellen comments
"I don't think a change in the White House either way will affect Fed policy," he said. "My hope is that neither campaign is interested in politicising the Fed."

Meanwhile, Bullard noted he had been critical of the Fed's "dot plot" summaries of policymakers rate outlooks recently, saying they may be giving too much forward guidance, removing the Fed's ability to make data-dependent decisions.

The dollar rallied against Asian currencies early on Monday after the revised GDP data and on Fed Chair Janet Yellen's comments on Friday that a rate hike in the U.S. in coming months would be appropriate.

The Korean won extended losses after Bullard's comments, trading down 0.9 percent against the dollar as of 0142 GMT.

The Fed most recently raised interest rates in December last year, which was the first rate hike in nearly a decade

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« Reply #111 on: June 02, 2016, 02:19:43 PM »

回應(0) 人氣(467) 收藏(0) 2016/06/02 10:41
MoneyDJ新聞 2016-06-02 10:41:44 記者 陳苓 報導
MarketWatch 1日報導,美銀美林證券暨量化策略師Savita Subramanian警告,今夏標普500指數最多將慘跌15%。由當前數字推算,這表示標普500會跌至1,780點,為將近16個月新低。Subramanian接受CNBC訪問表示,2011年起她一直對股市深具信心,今年是她首次轉空。她說,股市尚未完全反應出FED夏季升息的可能,情況令人憂心。

美國投資界有一句諺語,叫做「Sell in may and go away (5月賣、快走開)」,「金融巨鱷」索羅斯(George Soros)已事先在今年第1季(1-3月)將美股減碼37%、另外還加倍放空標準普爾500指數ETF,投資銀行如美銀美林、高盛與J.P.摩根也一致認為,全球股市夏季不妙,建議大家趕緊出脫持股。
MarketWatch 5月16日報導,Subramanian說,自1971年以來,Fed只有三次曾在企業獲利衰退時升息,分別是1976年、1983年與1986年,其中兩次美股都在接下來12個月走軟。FactSet調查顯示,美國企業Q1的每股盈餘較去年同期下滑7.1%,已連續第4季呈現萎縮

MoneyDJ 財經知識庫

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« Reply #112 on: June 03, 2016, 05:57:01 PM »

Timing of rate hike 'not really that critical': Fed's Evans
Reporting by Geoff Cutmore, writing by Anmar Frangoul
1 Hour Ago
COMMENTSJoin the Discussion

There could be two rate hikes in 2016 if data continue to be favorable but the timing of both won't prove to be crucial, Charles Evans, the Chicago Federal Reserve president, told CNBC on Thursday.
"Two rate hikes in 2016, that's my own call for that, if the data continue to be in line with my outlook, that's a slow and gradual increase this year," said Evans, who is an alternate member of the FOMC (Federal Open Market Committee) and votes on decisions when a full-time committee member is unable to.

"Timing's not really that important, you mentioned possibly two summer hikes, that would be a little bit more than I'd say is … priced in to the dots certainly and the market expectations," Evans added in an interview aired on Friday.

"Timing's not really that critical for my viewpoint, as long as by the end of this year we're at just a little under 1 percent," Evans added.

"I think that's given us enough time to … assess how the U.S. economy has gone, the global influences and whether or not inflation is more likely to pick up in a confident fashion towards 2 percent. That would position us well for the next year," he said.

Market participants are eagerly anticipating the next rate hike from the central bank after it approved a quarter-point increase in its target funds rate back in December. This was the first move by the bank after seven years of accommodative monetary policy in U.S. history, following the financial crash of 2008.

Investors have had to rethink their expectations for the next move with a slew of Fed speakers recently talking up the prospect of a move this summer. Federal Reserve Chair Janet Yellen said last that Friday an interest rate hike is "probably" appropriate in the coming months if economic data improve .

"It's appropriate, and I've said this in the past, I think for the Fed to gradually and cautiously increase our overnight interest rate over time and probably in the coming months, such a move would be appropriate," she said in response to a question at Harvard's Radcliffe Institute for Advanced Study.

The CME Group FedWatch probability for a June rate hike rose after Yellen's speech on Friday and is now highlighting a 21 percent chance of a move at the Fed's June 15 meeting.

'Just need to do our job'

Janet Yellen, chair of the U.S. Federal Reserve
Summer rate hike odds pop after Yellen comments
Federal Reserve Chair Janet Yellen speaks at the Radcliffe Institute for Advanced Studies at Harvard University in Cambridge, Massachusetts, U.S. May 27, 2016.
Yellen: Rate hike probably appropriate in the coming months

When asked about rate moves later this year, with U.S. elections due in November and the danger of the bank being drawn into a political debate, he said there had been previous times when the bank had needed to raise rates during an election cycle.

"Back in 2004 during the presidential election season, we started raising the funds rate which was 1 percent in June of 2004 and we started increasing rates by 25 basis points - what we didn't know at the time - each and every meeting for the next seventeen times. We went through the presidential election cycle doing that," he told CNBC.

"It was slow, it was gradual – although it was faster than what we are contemplating right now – and it was appropriate because interest rates had been low for very long and the economy was doing better."

He added that if the central bank moved later this year it would be a "natural policy response to the economy" and would only be what is expected of the bank.

"That's one reason why we need to have some measure of independence from short-run political concerns and we just need to do our job," he said.

'A very critical decision'

Charles Evans, president of Federal Reserve Bank of Chicago.
Melody Hahm | CNBC
Charles Evans, president of Federal Reserve Bank of Chicago.
Meanwhile, Evans gave his views on the U.K.'s upcoming referendum of its EU membership, with Brits set to go to the polls on June 23. When asked whether a so-called "Brexit" vote would have any bearing on a rate move in June, he said it would have important ramifications for the country.
"I'm not an expert, and I think that it's a very critical decision," Evans said.

"I'm not sure it plays an important role in our policy making beyond us just monitoring the U.S. data and general global financial conditions and having confidence that things are still on a good track," he later added.

Investors in the U.K. received a sharp reality check this week after a new poll on the upcoming referendum highlighted that the vote might just be closer than many people were thinking. Two polls on Tuesday from U.K. newspaper The Guardian and public opinion researcher ICM suggested voters were split 52 percent - 48 percent in favor of the country leaving the European Union, a so-called "Brexit".

Outlook on the US economy

Richard Kovacevich
June rate hike would give Fed option for 3 increases this year: Kovacevich
Daniel Tarullo
Fed's Tarullo says Brexit is factor in rate decision: Report

Speaking on Friday morning at a central banking event in London, Evans also gave his outlook on the U.S. economy, anticipating U.S. gross domestic product (GDP) to grow in the range of 2 to 2-1/2 percent over the remainder of this year.

"After the sluggish first-quarter annualized growth rate of 0.8 percent is accounted for, this would leave the increase in GDP for 2016 as a whole close to 2 percent — or about the same pace as in 2015," he said, according to a transcript of his speech.

He added that the U.S. consumer is the "linchpin" behind his relatively optimistic outlook, but iterated that there were several factors weighing on economic activity in the U.S.

"The slowdown in global economic growth — notably in emerging market economies — and uncertainty about international prospects have contributed to a rising dollar and declining commodity prices since mid-2014," he said.

"The trade-weighted dollar has appreciated about 20 percent since June 2014, while oil prices are down more than 50 percent over the same period. U.S. firms that sell their products in global markets and those exposed to commodity markets have felt the brunt of these relative price movements."

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« Reply #113 on: June 04, 2016, 05:11:20 AM »

Sharp Fall in U.S. Hiring Saps Chance of Fed Rate Increase in June


JUNE 3, 2016
The government reported on Friday that employers added just 38,000 workers in May, a troubling sign that the economic recovery may have stalled, at least temporarily, and a sharp slowdown in hiring that is expected to push back a decision by the Federal Reserve to raise interest rates.

Despite the anemic job gains, the official unemployment rate, which is based on a separate survey of households, fell to its lowest point in nearly a decade, 4.7 percent from 5 percent in April. But the decline was primarily a result of Americans dropping out of the labor force rather than finding new jobs.

“Boy, this is ugly,” said Diane Swonk, an independent economist in Chicago. “The losses were deeper and more broad-based than we expected, and with the downward revision to previous months, it puts the Fed back on pause.”

“The only good news is that wages held,” Ms. Swonk said. Average hourly earnings were up again, 0.2 percent for the month, for a gain of 2.5 percent for the year, continuing to rise at a faster pace than in recent years.

The weakness in May’s job totals were somewhat exaggerated because they reflected the Labor Department classification of more than 35,000 striking Verizon workers as unemployed. With those employees now back on the job, the missing strikers should be added back in next month’s report.

While Friday’s report is only a snapshot of the economy and the jobs engine could rev up again, it has sputtered this spring, with the Labor Department shrinking its estimate of March and April’s employment totals by 59,000 since the initial reports. The average monthly gain for the last three months was just 116,000 jobs.

While subject to further revision as well, May’s figures were the lowest monthly growth since September 2010.

Worries about the economy are a common refrain among supporters of Donald J. Trump, the presumptive Republican presidential nominee, as well as among those who are backing Senator Bernie Sanders’s faltering bid to lead the Democratic presidential ticket. Historically, the state of the American economy about six months in advance of the November election has played an outsize role in determining how people vote for president.

Even apart from the distortion created by the Verizon strike, the average monthly job gains so far in 2016 have fallen far shy of the nearly 240,000 average of the last two years, a pace that has helped buoy the economy and cut the jobless figure in half since the depths of the recession.

The Fed’s policy-making committee has its next three meetings scheduled for mid-June, late July and September.

Lael Brainard, a Fed governor and an ally of Ms. Yellen’s, described the May report as “sobering” in a speech on Friday afternoon.

Ms. Brainard said the weak job growth was a reminder that the strength of the recovery should not be taken for granted, and said she did not see clear evidence the economy had rebounded from a weak winter.

A construction site in Orlando, Fla. The average monthly job gains so far in 2016 have fallen far shy of the nearly 240,000 average of the last two years,
“Recent economic developments have been mixed, and important downside risks remain,” Ms. Brainard, who has pushed for the Fed to move slowly in raising interest rates, said at the Council on Foreign Relations in Washington. “In this environment, prudent risk management implies there is a benefit to waiting for additional data.”

Aside from the sluggish job creation, the labor force participation rate declined for the second month in a row, to 62.6 percent, and the number of people working part time for economic reasons rose sharply.

Investors wrote off the chances of a June rate increase after the latest release. The probability of a June increase, as implied by asset prices, fell from 21 percent to 6 percent in early trading, according to CME Group. The probability of a rate rise by September fell from about two-thirds, but remained at roughly 50/50 either way.

With the summer stretching ahead, the sentiment on Wall Street could perhaps be best summed up by the Tempos’ 1959 hit, “See You in September.”

Still, unless there are further signs of fresh economic weakness, most economists expect at least one rate increase before the end of the year. The unemployment rate, which the Fed regards as a key indicator, has finally dropped to where it was before the Great Recession began in late 2007

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« Reply #114 on: June 04, 2016, 05:14:21 AM »

Fed likely to avoid rate hike before Britain votes on leaving EU
June 3, 2016
Janet-YellenWASHINGTON: The US Federal Reserve may be forced to delay a rate hike at its June meeting because of mounting concern over the economic fallout from Britain’s vote on whether to leave the European Union.
The geopolitical risk likely will push any rate increase until at least July, despite apparent consensus among Fed officials that a hike is warranted by stronger US growth and tight labor markets.
The Fed’s June 14-15 rate-setting meeting comes just a week before the British vote on June 23. A “leave” vote is expected to roil financial markets, cause credit spreads to widen, trigger a rush into safe assets and bolster the dollar.
The dollar’s recent stability is one reason the Fed has become more comfortable with raising rates, and officials may want to let the threat of Brexit pass before moving to tighten financial conditions.
Fed Board Governor Daniel Tarullo on Thursday joined the chorus of those warning of his concerns over the British vote, telling Bloomberg that Brexit would be a “factor” he would consider at the Fed’s June policy meeting and said that the British vote’s impact on markets would be key.
The most recent poll found that voters in Britain – Europe’s second biggest economy and its most influential financial center – were evenly split on whether to stay in the EU or to leave.
By the time the Fed meets on June 14 and 15, at least four of the five Washington-based governors will have aired their views on the outlook for rates, with Lael Brainard due to speak Friday and Chair Janet Yellen appearing in Philadelphia next week.
Fed officials will release their latest economic projections at the June meeting along with a policy statement, and Yellen is scheduled to hold a post-meeting news conference.
The two governors who have addressed the Brexit vote so far have sounded notes of caution.
“I do see the possibility of a real hit to economic growth both in the UK and the EU,” Fed Board Governor Jerome Powell said last week. “I can imagine the upcoming Brexit vote as presenting a factor in favor of caution about raising rates.”
Secret meetings across Europe reveal uncertainty over what would follow a vote that British Prime Minister David Cameron calls a “leap in the dark” – and also concern about what happens if Britain stays in.
If Britain remains in the EU, it could lead to continued infighting in the ruling Conservative party and destabilizing battles with the rest of the EU.

Waiting on the Brexit vote is a “no-brainer,” said Jon Faust, a former Fed staffer and now a professor of economics at Johns Hopkins University. “Why move now as opposed to a few weeks from now?”
Consensus on caution
With few exceptions, the message from regional Fed bank presidents has been consistent: the upcoming Brexit vote may tip the scales against a June increase.
This is only the latest obstacle to the Fed’s two-year struggle to normalize US monetary policy after dropping rates dramatically during a protracted downturn.
In 2014, the crash in oil prices and a rapid spike in the value of the dollar crushed US exports and drove inflation into a ditch.
Last year, a surprise slowdown in China’s economy, alongside the malaise in Europe and Japan, sparked global market turbulence and broader concerns about a worldwide recession. That vexing landscape kept the Fed on hold until December.
Now, Brexit aside, the prospect of a rate hike soon appears all but certain. Unemployment dropped to 5 percent in April; inflation appears to be gaining traction as the drag from cheap oil and a strong dollar fades; and the lull in growth over the past few months has proved temporary, with consumer spending and the housing market showing particular strength.
The probability of a June rate increase is now about 17 percent, according to Fed funds futures trading data compiled by the CME Group, compared to 57 percent for July.
While the impact of a vote to leave the EU is uncertain, one widely expected and immediate result is likely to be a jump in the value of the dollar – a further blow to US exporters and another drag on inflation that the Fed still considers too low.
July over June
If the Fed does indeed take a pass at its June meeting, officials have signaled they’ll be ready to move in July.
Minutes of the Fed’s March policy meeting showed officials preparing the ground for higher rates sometime in the summer months. After July, the next option would be September, in the middle of a US election campaign, in which the Fed and Yellen could well become targets of debate.
Four of the Federal Reserve’s 12 regional bank presidents have asked to raise the interest rate charged to commercial banks for short-term loans – a proxy for saying the target rate should move higher.
If the board defers a rate hike at its June meeting, Yellen will face a rhetorical challenge in explaining why global factors are again trumping domestic economic data – when Fed officials have tried to convince the public that their decisions are “data dependent.”
One approach she could take, economists said, is to flag the Fed officials’ agreement in favor of gradual rate rises over the next couple of years, but to emphasize that low inflation means there is no urgent need to start raising rates right away, especially ahead of such a one-time and potentially critical world event.
“Even if Brexit were seen to be an unlikely outcome, we think this extremely cautious Fed Chair might see relatively little cost to waiting another seven weeks to act,” RBS economists Michelle Girard and Kevin Cummins said in a note.
– Reuters

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« Reply #115 on: June 04, 2016, 08:13:35 AM »

This may bring on new handwringing about the economy
Patti Domm   | @pattidomm
2 Hours Ago
COMMENTSJoin the Discussion
May's weak jobs report raises the anxiety level in markets and may have sidelined some investors as they sort through what signals the economy is really sending.

The worst jobs report in more than five years may also have dashed some traders' hopes that stocks can break out to new highs in the near future. Focus could now swing to whether the market can hold its recent range, and every piece of economic data will be important. In the week ahead, there is a relatively light data calendar including productivity and costs Tuesday and the JOLTs report on job openings and turnover on Wednesday.

The big event of the week comes Monday when Fed Chair Janet Yellen speaks in Philadelphia on the economy at midday.

economy pedestrians after hours look ahead
Jon Jones | Reuters
Prior to Friday's report of just 38,000 nonfarm payrolls, the expectations had been for a slightly hawkish-sounding Yellen to guide markets toward a summer rate hike. But now economists are wondering whether Yellen will veer to the dovish side and repeat that the Fed's decision depends on the strength of the data while playing down her previous comment that the Fed could raise rates in the next couple of months.

"She can't help but express concern. She, of all people, will not dismiss this. She has also as recently as last Friday talked about ongoing labor slack," said David Ader, chief Treasury strategist at CRT Capital.

Economists had expected 164,000 nonfarm payrolls and had expected some weakness in the number because of the inclusion of 35,000 striking Verizon workers. But the number defied all expectations and was nearly 100,000 below the most pessimistic forecasts.

Workers assemble line for automobiles
This force may explain the awful jobs report: Ex-Obama aide
"It gives Yellen a much more difficult task Monday. People will be expecting her to walk back the tone that the Fed has put out in the last couple of weeks. In trying to do that, it's literally a tightrope act because if she doesn't walk the tone back enough people are going to be uncomfortable with the fact that they could hike at a rate quicker than what the market expects it to be," said Julian Emanuel, equity and derivatives strategist at UBS. "If you walk the tone back too much, it sounds like you're totally panicking."
Fed funds futures Friday priced out a rate hike for this year, and odds for a July hike moved closer to a 30 percent chance while June fell to single digits.

"There's no other data that's available that would suggest job growth has slowed, certainly to the degree this number would suggest. You can't dismiss it. It's an important report, but there are times when the data, for whatever reason, are not representative of the reality of what's going on," said Mark Zandi, chief economist at Moody's Analytics.

Job seekers wait in line in to fill out a job application
Wait: The US may have actually LOST jobs in May
For the Fed to move on rates in the next couple of months, the economic data will now have to outperform. "People are going to be worried about the slowing pace of employment and about this data," said John Briggs, head of strategy at RBS. "It's not a good day for the economy. The market's now pricing [that] the burden of proof is going to be that they need strong data to convince them to go, just as coming into the [jobs] number, you needed weak data to convince them they weren't going to go, and now you've got that."

Stocks initially traded lower on the jobs report and yields fell sharply. Stocks, however, recovered much of their losses on the day Friday and were mixed on the week. The S&P 500 ended the week above the key 2,100 level, at 2,103, down six points Friday. The S&P was virtually unchanged on the week, while the Dow was off 0.4 percent for the week at 17,807.

Treasury yields moved lower across the curve after the jobs data Friday. The two-year was at 0.77 percent late in the day, as traders bet against a Fed rate hike. The bond market also drew buyers seeking safety, and the 10-year yield fell to 1.69 percent.

Michael Kors store front
Top stocks of the week and how to trade them
Although Fed officials have recently focused on June for the next rate hike, many economists believed the Fed would wait until at least July because of the June 23 U.K. vote on whether to remain in the European Union. If the voters choose to exit the EU, or Brexit, strategists expect the uncertainty to create market volatility.

"We are in a liquidity vacuum between now and June 23. Literally, I don't know any other way to say it. Trading volumes have been shrinking for weeks, and before this [U.K. vote] event that's very well-known and dwelled on for months and months. The uncertainty of [the May jobs] report gives investors even less incentive to trade. Having tested the upper end of the range, it's not likely we're going to break out of that range any time soon," said Emanuel. However, Emanuel still expects to see the markets make new highs in the second half of the year.

Scott Redler, partner with, said traders will now watch support levels to see if the market can stay in its range or break out.

Janet Yellen, chair of the Federal Reserve.
Fed, again, left with egg on its face as recovery falters
"Instead of breaking out, we [will] probably fall back in the range a little. Next week, I'll be coming in to see if the S&P can hold above 2,088 for a session or so, and if it still can't pull back, then perhaps the market will make another attempt using the Brexit as a catalyst," he said.

Financial stocks were down 1.4 percent Friday, and utilities were up 1.7 percent, as traders reacted to the idea that the Fed would hold off on rate hikes.

"The market was set up for the next explosive move," he said. "You had strength in the banks. You had the biotechs bounce back for the last week and a half. … Technology was in the game. There were a lot of pieces of the puzzle for the S&P to make a move. … Then you had this horrendous report. No matter how you sugarcoat it, it was weak."

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« Reply #116 on: June 04, 2016, 08:32:42 AM »

Fed’s Brainard calls for ‘waiting’ as labor market has slowed

By Steve Goldstein
Published: June 3, 2016 12:48 p.m. ET

Central bank official not in a rush to lift interest rates
Lael Brainard, governor of the U.S. Federal Reserve
WASHINGTON (MarketWatch) — Federal Reserve Gov. Lael Brainard on Friday called for the central bank to wait for more data before lifting interest rates as she said the jobs report shows the labor market has slowed.

Brainard, who’s the first Fed official to speak since the Labor Department reported just 38,000 jobs were added in May, said the central bank should wait for more data on how the economy is performing in the second quarter, as well as a key vote by Britain on whether to leave the European Union.

“Recognizing the data we have on hand for the second quarter is quite mixed and still limited, and there is important near-term uncertainty, there would appear to be an advantage to waiting until developments provide greater confidence,” Brainard said at the Council on Foreign Relations.


She said she wanted to have a greater confidence in domestic activity, and specifically mentioned the uncertainty around the Brexit vote, as reasons to pause at the next Federal Open Market Committee meeting, which is due to end June 15.

Also read: June’s out for a Fed rate hike and July’s on life support

Financial markets have largely come to the conclusion, pricing in just a 4% chance of a June interest-rate hike.

Brainard, who has been advocating a slow pace of lifting interest rates since joining the central bank, didn’t sound impressed with the labor market.

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Fed's Brainard pointed to the 3-month average of jobs growth as a reason to wait on rates
12:36 AM - 4 Jun 2016
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“The data in today’s labor market report on balance suggest that the labor market has slowed,” she said. “Nonfarm payroll employment increased at an average monthly pace of 116,000 over the last three months--well below the 220,000 per month average pace over the preceding twelve months.”

While the unemployment rate moved to a new low for the current recovery, Brainard pointed out involuntary part-time employment increased and the labor force participation rate declined.

Federal Reserve Chairwoman Janet Yellen is set to give her views on the economy and monetary policy on Monday in a speech in Philadelphia. Yellen last week said she anticipated lifting interest rates in the coming months

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« Reply #117 on: June 04, 2016, 08:44:34 AM »

Alan Greenspan is Against Inflation... Again
Geoffrey Pike
Photo   By Geoffrey Pike
Written Friday, June 3, 2016
Former Federal Reserve Chairman Alan Greenspan was against inflation before he was for it. Now that he is long retired, he seems to be against it again.

Greenspan headed up the Federal Reserve for over 18 years, from 1987 to early 2006. But Greenspan’s history goes a lot further back than the Reagan era.

In 1966, Greenspan wrote an essay called “Gold and Economic Freedom,” published in Ayn Rand’s book Capitalism: The Unknown Ideal. Greenspan laid out the case for economic freedom and linked it with the use of gold as money.

Greenspan wrote: “In the absence of the gold standard, there is no way to protect savings from confiscation though inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.”

This is one of the best short essays I have seen on the subject. He understood that productivity and living standards are highly correlated with a stable and reliable form of money. Gold served as money, as chosen by the marketplace, for thousands of years. Central banking and fiat currencies are a recent invention when taken in the context of history.

There is no question that Greenspan is an intelligent man who understands the workings of a free market. He obviously also understands the monetary system well.

This is also the reason I despise Greenspan in so many ways. He is a complete sellout.

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Greenspan the Inflationist

Greenspan, despite his previous affection for gold as money, went on to accept the position of Federal Reserve chair. If he had used his position as a platform to end the Federal Reserve and return the process of setting interest rates to the marketplace, then there wouldn’t be a problem.

Even if Greenspan had just used his time as Fed chair to implement a relatively stable money supply without heavy manipulation of the interest rates, then we might still be able to give him a pass.

The problem is that Greenspan got into office and was quickly confronted with Black Monday on October 19, 1987, which resulted in a drop of the Dow of more than 22%. Greenspan quickly sprung into action with monetary stimulus.

Greenspan never went crazy with monetary inflation, as was the case from 2008 to 2014 when the Fed quintupled the adjusted monetary base. But over this time period (mostly with Bernanke as Fed chair), much of the new money went into excess reserves at the banks, thus limiting actual price inflation.

Greenspan was subtler, but there was inflation nonetheless. The monetary base more than tripled on his watch, but this was over a period of 18 years. That’s still bad.

He helped blow up the tech bubble in the 1990s. After September 11, 2001, and a downturn in the economy, Greenspan quickly provided the stimulus to cover over the minor recession. Instead of letting the correction happen, he lowered interest rates via the federal funds rate and increased the money supply. This then led to the housing bubble.

The housing bubble did not implode on Greenspan’s watch, but it was the Fed policies during Greenspan’s time that helped blow up this bubble. There were certainly other factors with the government-sponsored enterprises and the government’s encouragement of loose lending, but the housing bubble never could have blown up the way it did without the easy money and low interest rates provided by the Fed.

So while Greenspan is very bright, this is the very reason he is so bad. He knew better, but he played the game of the insiders. He acted as a stooge for the left to claim that his free market policies just weren’t working, while his policies were not at all reflective of the free market.

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Disaster Ahead

Greenspan is now 90 years old, but he is still making appearances. He was recently interviewed on Fox Business by Neil Cavuto.

Greenspan said, “What the markets are beginning to show us is an acceleration in money supply for the first time in a very long time.”

He must not be referring to the base money controlled by the Fed because the Fed has had a tight monetary policy since the end of 2014. Janet Yellen has surprisingly kept a tight stance, despite not raising interest rates as much or as fast as expected. Still, we should not doubt that Yellen would quickly revert to a loose monetary policy if “needed” by the economy.

Greenspan also said that we have a global problem of a shortage in productivity growth. He is correct on this point, but unfortunately he doesn’t point his finger to the main culprit, which is the previous loose policy of the Fed.

He also said we should be running federal surpluses right now and not deficits. Again, he is correct on this point, but it is the Fed that has enabled these deficits to a large degree. If the Fed were not a ready buyer of U.S. Treasuries, then there probably wouldn’t be so much confidence for investors to pile into Treasuries at low rates.  And it is the previous policies of the Fed that have enabled such a long period of ultra-low interest rates.

Greenspan also said that entitlements are the biggest issue facing the U.S. economy. And again, there isn’t a lot to disagree with here. But also again, it has been the Fed that has enabled the federal debt to be run up the way it has. You don’t see state and local governments run up these levels of debt as a percentage of spending. They can’t do it because they can’t create money out of thin air. If they get too far in debt, they face actual bankruptcy.

At the federal level, the politicians and bureaucrats spend money with few limits. They don’t have to worry about debts because the Fed can always just buy it up with newly created money.

In the interview, Greenspan said entitlement spending is crowding out savings and capital investment. He says that capital investment is the critical issue in productivity growth and that productivity growth is the critical issue for economic growth.

In other words, Greenspan likes to return to his free market roots every now and then with his talking points. Because again, he is absolutely right in what he is saying, which is why it is so frustrating.

Savings and capital investment are the main components for economic growth. But it is government spending and the Federal Reserve that discourage savings. What does Greenspan think the Fed was doing under his watch for 18 years? It is hard to call money pouring into tech stocks, and later housing, capital investment. For capital investment to increase living standards, it has to be investment into things that are sustainable and will meet consumer demand. With the Greenspan bubbles, these were cases of resources being misallocated, which stunt economic growth in the long run.

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Heeding the Warnings

If Greenspan had put on a mask for the interview and called himself by another name, then somebody with an understanding of economics watching him would say he is making perfect sense. The problem is that Greenspan’s comments, when analyzed properly, are a complete repudiation of what he did for 18 years as Fed chair. He needs to take a look in the mirror.

It is not uncommon for politicians and government officials to speak in a different tone once they are out of office. Maybe Obama will start talking about what a mess our health insurance system is once he is out of office.

The major problem with Greenspan is that he generally advocates more free market policies, but he completely sold out when he was with the Fed.

Still, his warnings should not be taken lightly. He is right that there is a major train wreck ahead with regards to entitlements. The federal government is running massive deficits right now during a so-called recovery. How bad will the deficits be if we fall back into recession?

The Fed will continue to resort to digital money printing when it is called upon to do so. If gold were money, this would not be possible, as you can’t create gold on a printing press or a computer screen.

Greenspan was right over five decades ago when he linked gold with economic freedom. For the sake of your own economic freedom, it is a good idea to own some.

Until next time,

Geoffrey Pike for Wealth Daily

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« Reply #118 on: June 05, 2016, 07:49:26 AM »

2016-06-04 18:23     


聯儲局理事布雷納德(Lael Brainard)認為,“正在冷卻”下來的美國就業數據顯示,勞動力市場腳步已放緩,不應過早升息。
供給管理協會(I S M)公佈,5月非製造業指數降到52.9,遠低於市場預估的55.3,也是兩年多來最低,預示第二季經濟成長將更加平淡。
芝加哥聯儲總裁埃文斯(Charles Evans)表示,在國際經濟已經失去動能之際,本月英國有關歐盟身份的公投削弱了對經濟前景的信心。

Follow us: @SinChewPress on Twitter | SinChewDaily on Facebook

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« Reply #119 on: June 05, 2016, 07:55:03 AM »

What Happens When The Fed Hikes During An Earnings Recession

Tyler Durden's picture
by Tyler Durden - Jun 4, 2016 11:19 AM
At least until yesterday's abysmal jobs report, there was - just like last December - a renewed sense of optimism that just because the Fed had gotten surprisingly hawkish in recent weeks (just like it did in November) starting with the FOMC minutes, passing through the speeches of numerous Fed presidents, and culminating with last Friday's Janet Yellen appearance, that the US economy was once again set for a major rebound, leading to a substantial repricing higher in rate hike odds which was also coupled with a boost in risk sentiment. "Maybe the Fed will be right this time" the market thought.

Alas, the Fed was wrong as yesterday's jobs print showed all too well. As Gundlach told Reuters two days ago, "it's like people think that the Fed has this super-secret information about how strong the economy is about to become or that the economy is about to become smoking hot." He said that just hours before the BLS reported the worst non-farm payrolls data in nearly 6 years.

Gundlach also followed up with a comment on the Friday's jobs report: "It is a terrible employment report and the unemployment rate fell because people gave up. People are dropping out. There is no way to sugarcoat this report. You really can't sugarcoat it, can you?  When you start to see the figures fall in temporary workers, that means people are not needed. The temp figures are the canary in a coal mine."He added that "this puts incredible significance for next month's employment report after May's terrible report. It might be three strikes."

He was referring to the Fed's credibility, which once again took a big hit in the past 24 hours, because as we showed yesterday, rate hike odds of both a June and July hike have tumbled. The chart below, courtesy of Bloomberg, is a direct representation of not only June rate hike odds which crashed to virtually zero, but also of the Fed's residual credibility.

On the other hand, the market should be delighted, because just like in late 2015 when the media narrative was one of constant hammering how a rate hike is good for stocks (only to do a dramatic U-turn... just like now), the reality is that the US economy is already on the verge of a recession: to be sure manufacturing already is contracting, the latest non-manufacturing ISM and Markit PMI surveys were both dreadful confirming the manufacturing malaise is spreading, wile corporate profits have not been negative for 4 quarters in a row (and according to Factset Q2 is set to report a -5% drop in Y/Y EPS once more).

As such the right question to ask is not what happens to stocks when the Fed starts hiking rates, but what happens to stocks when the Fed is hiking rates during an earnings recession. And, as BofA calculated recently, "Hiking during a profits recession usually hasn’t ended well." The details: "The Fed has only embarked on a tightening cycle during a profits recession three other times, which typically spelled downside for the S&P 500. .. The Fed began tightening despite a recession in corporate profits, a rare occurrence. In fact, since 1971, the Fed has begun tightening during a bona fide profits recession only three other times – 1976, 1983, and 1986; two out of those three instances saw stocks drop over the next twelve months. The S&P is essentially flat from when the Fed initially hiked."

In short: if corporate earnings are already contracting, typcially an early indication of economic slowdown, nothing good comes out of a rate hike as shown in the table below.


But wait, there's more, because if the Fed thinks that "one and pause" will help the S&P500, it may want to check the evidence. As BofA adds, "a pause doesn’t portend good things: our Global Investment Strategy team recently noted that equity returns have been generally negative in tightening cycles in which the Fed paused for one to two quarters between the initial and second rate hike." More: "in cycles where the Fed has paused one to two quarters between the first and second hike, equities have been in the red over the next three and six months, and were up just 3% in the twelve months following the initial hike."

In other words, having missed its rate hike window for this summer, absent a June jobs report that somehow surges to 250,000 or more, the Fed is now stuck until September at the earliest, at which point it will go into hibernation again until after the presidential election, at which point everything wil be in flux.

This also means that now that the Fed can admit defeat because the US economy just hit a brick wall as per the BLS, Yellen's next move to be priced in by the market may not be a rate hike at all, but a cut. Yes, a 25 bps buffer is hardly enough, but it may have to do. While for now the US economy does not support a recession-type response by the Fed, S&P 500 profits are i already in a recession, and it is they that make a rate hike here impossible.

Ironically, now that the US economy is finally cooperating with a dovish relent, all that Yellen will need is some very bad news or FX volatility out of China to help complete the cycle.

Time for another "Shanghai Accord" maybe, this time everything that was agreed upon in February but in reverse..

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« Reply #120 on: June 05, 2016, 02:25:50 PM »

Why The Fed Is Trapped: A 1% Increase In Rates Would Result In Up To $2.4 Trillion Of Losses

Tyler Durden's picture
by Tyler Durden - Jun 4, 2016 7:53 PM
A funny thing happened as every central bank around the world rushed to stimulate their economy by devaluing their currency in a global FX war that is now 7 years old and getting more violent by the day: with bond yields plunging, and over $10 trillion in global debt now having a negative yield, every fixed income investor starved for yield was pushed into the long end of the bond curve where whatever yield is left in the world of "safe" bonds is to be found. As long as interest rates never go up, this strategy is relatively safe. However, a major risk emerges when central banks start tightening.

To be sure, banks have been eager to front-run any concerns about the Fed's rate hike by cheering higher rates as precisely what they need to be more profitable, and the market has so far believed and rewarded bank stocks the higher rate hike odds rose. Just this Thursday, speaking at an investor conference James Dimon said that if short-term and long-term rates were to move up by 1 percentage point simultaneously, 70% of the benefit would come from the move in short-term rates. The reason for this is that even if long-term rates remain under pressure, and the curve flattens further, an increase in short-term rates provides an immediate boost to bank profits. That is because many loans are automatically priced against short-term benchmarks like LIBOR and Prime.

What Dimon did not discuss is the P&L impact from the higher yields and dropping bond prices in the long end of the yield curve. And it is here, in the unprecedented duration exposure that central banks have forced everyone into, that the true risk resides.

How big is the risk? According to an analysis by Goldman's Charles Himmelberg, if rates rise by the Jamie Dimon-referenced 1 percentage point, the market value loss would be between $1 and $2.4 trillion! Putting this loss in context, even the smaller $1trn loss would be over 50% larger than the market value lost in the 1994 bond market selloff in inflation-adjusted terms, and larger than the cumulative credit losses experienced to date in the non-agency residential mortgage backed securities market. And this is only only as a result of a 1% interest rate increase: assuming full normalization of rates to their historical level of 3.5%, and the level of mark-to-market losses climbs to a staggering $3 trillion.

The culprit? The Fed, the same Fed which does not to grasp that by "renormalizing" into the biggest bond bubble in history is assuring massive losses for the financial sector.

The problem is simple: having inflated a gargantuan bond bubble, letting the air out would by definition lead to dramatic consequences not just for bonds but for all other asset classes.

As Goldman shows in the chart below, the growth in total debt outstanding, in constant 2015 dollars, has been unprecedented. The total face value of all US bonds, including Treasuries, Federal agency debt, mortgages, corporates, municipals and ABS, is $40 trillion (Securities Industry and Financial Markets Association). The Barclays US aggregate is a smaller number, $17 trillion, as the index excludes some categories of debt, such as money markets, with low duration. To end up with a more palatable number, Goldman uses the Barclays measure of debt outstanding, although it admits this may lead to an understatement of the total loss potential. Using either measure, total debt outstanding has grown by over 60% in real Dollars since 2000.


It is not just the notional amount of debt that has been relentlessly rising: as Exhibit 3 shows, the aggregate interest rate duration across the bond market has also increased over the past several years, up over 20% vs. the 1995-2005 average level. Longer durations are largely driven by lengthening maturities on the bonds outstanding, as issuers have elected to term out their debt structures. Exhibit 4 shows that the average maturity of corporate bonds issued in 2015 and 2016 is over 16 years,  vs. an average of 8.6 years during 1995-2005. The US Treasury has also chosen to lengthen its debt maturity structure, with more use of long duration bonds.

The secular decline in nominal interest rates has also contributed to the drift upward in bond duration.

In 1994, the average yield on the bond index was 5.6%, vs. 2.2% currently. Lower bond coupons means that proportionately more of the bond cashflows now comes from principal, which tends to be distributed towards the end of the bond lifetime.

Here is the math of how a 1% increase in rates would lead to trillions in losses.

Combining a duration estimate of 5.6 years with a total notional exposure of $17trn, and current Dollar price of bonds of $105.6, indicates that, to first order, a 100bp shock to interest rates would translate into a $1trn market value loss. That is using the more conservative estimate of the bond market. Using the broader bond market sizing of $40trn, the market value loss estimate would be $2.4 trillion. While Goldman believes that using the larger number "would likely be an overstatement, as much of the extra debt in the broader universe is either short maturity or floating rate", even the smaller $1 trillion loss estimate is large: over 50% larger than the market value lost in the 1994 bond market selloff in inflation-adjusted terms, and larger than the cumulative credit losses experienced to date in the non-agency residential mortgage backed securities market.

As Goldman concludes, "even if there is not a large net social loss from a rise in rates, the $1 trillion gross loss estimate suggests that some investor entities would likely experience significant distress. In the 1994 bond market decline, for example, losses on a mortgage derivative portfolio were a major factor contributing to the Orange County, California bankruptcy event. All in, the increase in total gross debt exposure, combined with lengthening bond durations and an arguably expensive bond market, suggest that rising yields should be on the short list of scenarios to be monitored by risk managers.

This ignores the losses that would also impact the Fed's own holdings of rates instruments: at last check the Fed's balance sheet had a DV01 of about $2.5 billion, or a $250 billion hit for every 1% increase in rates.

As Bloomberg adds, analysts and regulators have warned for months that rising rates will be painful for investors and lenders, but bond yields remain stubbornly low. Perhaps the reason for this is that "investors and lenders" realize that it is only a matter of time before the Fed understands it is trapped and as a result of these gargantuan losses that would be imposed on the financial industry, it simply can not hike rates. Alternatively, if there is indeed as much as $2.4 trillion in losses coming, then while bonds will be slammed, it is the equity that will be wiped out. And, as this market has demonstrated all too well, when equity selloffs start, the proceeds usually go right into bonds, making the bubble even bigger.

On the other hand, if the Fed - which has demonstated it is painfully clueless in these past few years - intends to push on with a rate hike despite a raging profits recession and a global economy that is one snowstorm away from contraction, then the trade is simple: take advantage of the algos' stupidity and short financials. Because far from "beneficiaries" of the Fed's tightening on the short end, as much as Jamie Dimon would disagree, it is the long end where the market's unprecedented duration risk is about to rear its ugly head if and when the Fed does try to "normalize."

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« Reply #121 on: June 05, 2016, 02:27:28 PM »

Fed's Mester says gradual rate hikes still appropriate after jobs report
20 Hours Ago
COMMENTSJoin the Discussion
The latest disappointing U.S. jobs number has not changed the overall economic picture and gradual rate hikes remain appropriate, Cleveland Federal Reserve President Loretta Mester said on Saturday.

The Fed raised rates in December for the first time in nearly a decade. But further tightening has proven hard to achieve, and most economists now see the next move in September.

"I still believe that in order to achieve our monetary policy goals, a gradual upward pace of the funds rate is appropriate," Mester, a voting member on Fed policy this year, told reporters in the Swedish capital.

"The timing of actually when the rate hikes would occur and the slope of that gradual path is data-dependent." Fed policy-makers next meet on June 14-15 to decide on rates.

Cleveland Federal Reserve President Loretta Mester
Getty Images
Cleveland Federal Reserve President Loretta Mester
The U.S. economy added just 38,000 jobs in May, well below the consensus estimate of 164,000 and the smallest gain since September 2010.

"You can't read too much into one number, but it is certainly part of the data that will be taken into account as we go into the June FOMC meeting and for the rest of the year," Mester said.

Job seekers stand in a line at a career fair in Chicago.
Economy whiffs on job creation in April
"I think that the weak employment number has not changed fundamentally my economic outlook."

In a speech, Mester also weighed in to the debate about the role of monetary policy in heading off financial imbalances saying the Fed should only resort to using interest rates if other more precise tools fail.

"If our macro prudential tools proved to be inadequate and financial stability risks continued to grow, I believe monetary policy should be on the table as a possible defense," she said.

As the Fed approaches a potential rate hike as soon as this summer, one reason to act sooner than later is to head off any brewing instabilities in risky corners of financial markets such as commercial real estate, where high valuations have attracted some recent concern.

So far the Fed's approach has been to use financial regulations and supervision of banks and other firms - so-called macro prudential tools - to head off any emerging risks.

"Financial stability should not be added as a third objective for monetary policy," said Mester

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« Reply #122 on: June 06, 2016, 07:08:01 AM »

The Fed's Rate Hike Cycle Is Likely Complete, Not Just Beginning

Tyler Durden's picture
by Tyler Durden - Jun 5, 2016 3:05 PM
Submitted by Chris Hamilton via Hambone's Stuff blog,

The Federal Reserve continues discussing the timing for a cycle of rate hikes and a return to "normal"... but I think there is more than ample evidence which points to exactly the opposite.  Seems the adage "watch what they do...not what they say" is appropriate as ever.  So where's the evidence?

1) FFR and Manufacturing Employment Growth Cycles

The chart below shows a 3yr moving average of the growth/decline in manufacturing jobs in the US vs. the same 3yr moving average of the Federal Funds Rate.  Manufacturing job growth representing a proxy for business and economic expansion.  Noteworthy are the blue arrows representing cycle peaks in manufacturing job creation all (except this present cycle) taking place during a rising rate environment and followed a couple years later by cycle interest rate peaks (dashed black arrows).  This next round of rate cuts incented the next round of investment and manufacturing job growth.  This has been a highly reliable indicator.

I draw your attention to the last blue arrow on the right of the chart.  It doesn't seem to agree with the Fed that it's about time to start a rate hike fact it seems historically to argue now is the point in time the Fed typically begins easing?!?

And a close-up since 1980...the pattern of rate cycle bottoms soon after corresponding with manufacturing job cycle tops is fairly plain (yellow dashed arrows).  However, previously this was taking place during a rate hike cycle...but not this time.

Which seems to argue that the Fed is far more likely to start cutting interest rates (NIRP anyone?) than on the cusp of a rate hike cycle.


2) Fed Funds Rate and Shadow QE Rate

This rate cut rather than hike scenario seems to agree with the work done and posted on the Atlanta Fed's website (HERE) that QE was essentially the equivalent of negative interest rates (charted out below).  This additional QE accommodation in addition to ZIRP peaked with negative 2.9% rates in early 2014.  Upon the initiation of the taper of QE in early 2014, effectively the interest rate hike cycle began.  And I suggest that the Fed's .25% hike early this year was the end of the hiking cycle...not the start.

This viewpoint finds significantly more evidence as one peruses the demographics of our situation...not the swelling ranks of old but the stalling young population, total employment among them, and full time employment (chart below).

3) Decelerating and Declining Core US Population and Employment

As of 2000, the 25-54yr/old segment of the US population made up 120 million persons and held approximately 75% of all jobs in the US.  This critical core populations period of rapid growth from post WWII (and shown from 1980 in the chart below) ended just prior to the turn of the century.  Since that time, the core group representing the vast majority of the US workforce (and the vitality of the US economy) has entirely stalled out.  There are now 600k fewer total jobs among this core population segment than in 2000 (where this data set becomes available) with 500k of those representing declining full time jobs.  However, the redline rocket shot in the chart below representing mortgage debt went ballistic in this same period.  The Federal Reserve mandated interest rate cuts with the intention to substitute credit for declining numbers and quality of potential consumers and home buyers.  The Fed simply no longer believed markets premised on supply and demand should determine prices...the Fed would determine the "correct" values and centrally impose policy to achieve these targets.

And what that looked like comparing the Federal Funds Rate vs. outstanding US mortgage debt.  The sudden fall in mortgage debt starting in '08 corresponded to two contradictory inflections.  1) the implementation of ZIRP and the lowest mortgage rates in a lifetime, and 2) the peak of the 25-54yr/old population, employment, and full time jobs.  The demographic peak and fall seemingly overwhelming the Fed's "free money"...but the crowding out of those typically looking at bonds for retirement income or foreigners looking for a "safe haven" found a new "home"; rental real estate but with a minimum 20% down-payment (and often fully in cash).

Below, a close-up of these variables since 2000.  Difficult to imagine what a rate hike cycle beginning now would look like given the fact that the Fed's ZIRP policy couldn't induce any net new mortgage debt since its introduction.


4) Total Population Growth vs. Full Time Job Growth

Over the previous and current interest rate cycles (measured from peak to peak), the growth in total US population vs. the net new growth in full time jobs above and beyond the previous cycle employment peak (below).  This cycle has only replaced the jobs lost during the downturn but has created no net new jobs...not typically a time to begin slowing the economy with rate hikes.

5) "Not in Labor Force"

And the big winner...the true growth engine of ZIRP and QE...the present explosion of those deemed "not in labor force" (below).  Those deemed neither employed or "unemployed".  Simply "other".  This seems to be where nearly all the growth in the US population has gone over the current interest rate cycle.

6) Boooooomers

Lastly, please no proposing that the rise in "not in labor force" is solely due to the retiring boomers.  The chart below outlines the rising 55+yr/old population, employment, and full time jobs among them.  In fact since '00, all gains in full time employment have been among the 55+yr/olds simply offsetting the full time job loses seen among the 25-54yr/olds.  The swelling elderly ranks filled with underfunded seniors who are running into stagflation (high rising costs absent rising COLA's).  They are essentially left with the choice to continue working longer but in so doing are mortgaging the young adults future to fund their present.  This essentially means there is a generational skip taking place...hollowing out the core populations finances and the economy so dependent on them.


Somehow, it seems the preponderance of evidence points to this being the typical timing the Fed chooses to initiate a new cycle of accommodation and rate cuts rather than the idea we are just starting a rate hike cycle.

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« Reply #123 on: June 06, 2016, 08:19:39 AM »

The Fed painted itself into a corner: Saxo Bank CIO
Stephanie Landsman   | @stephlandsman
3 Hours Ago
COMMENTSJoin the Discussion

Painting in a corner
Time to get nervous—the Fed painted itself into a corner: Saxo Bank CIO
The Federal Reserve may be in a box when it comes to conducting monetary policy — a scenario likely exacerbated by disappointing jobs report numbers released last week.

Just 38,000 jobs were added to U.S. payrolls in May, the weakest performance in nearly six years. The data stoked new fears about the economy's health, and threw cold water on the Fed's recent hints at higher rates in the coming months.

"Friday's data again pushes back decisions," said Saxo Bank chief economist and chief investment officer Steen Jakobsen told CNBC recently. "The ability of the Fed to move now is almost entirely based on their 'need' or 'want.'"

Late last month, Fed chief Janet Yellen said in a speech that an interest rate hike was "appropriate" in the near term, and could rise gradually. With that in mind, Jakobsen argued the Fed has painted itself into a corner, as well as other central banks around the world.

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Back in April 2015, he published a note declaring that zero growth, zero inflation, and zero reforms have left countries drowning in a "new nothingness" and a "world stuck in neutral. "

The issues concerning him the most right now: The Fed appears to be losing its communication battle, and how it's been making policy decisions as the U.S. deals with the lowest productivity in decades.
"You have to be worried the trend will continue and the Fed will make it worse," Jakobsen told CNBC's "Futures Now" last week.

"We need to be nervous about the consequences of what I perceive to be one of the biggest monetary mistakes of the Federal Reserve," he said. "The fact they move not based on their mandate—they move based on the U.S. economy which is still way, way below its potential growth."

According to its mandate, the Fed has a responsibility to make decisions based on full employment and price stability.
"I don't really see why the Fed should move based on economics and external factors like the U.S. dollar which remains relatively strong," he said.
Jakobsen still believes the Fed will hike interest rates at its July meeting, even though he says this would be a mistake. He says it should wait to raise rates until the economic data supports it, and there's no timetable for that

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« Reply #124 on: June 07, 2016, 05:59:05 AM »

Janet Yellen probably just signaled two interest rate hikes for this year
Jeff Cox   | @JeffCoxCNBCcom
4 Hours Ago
COMMENTSJoin the Discussion

If Fed Chair Janet Yellen has her way, there likely will be two rate hikes this year, contrary to current market expectations.

While Yellen didn't overtly express that desire, there was one key section of the speech she prepared Monday that strongly signaled two hikes on the way:

Next week, concurrent with our policy meeting, the FOMC participants will release a new set of economic projections. Those could, of course, differ from the previous set of such projections in March. But speaking for myself, although the economy recently has been affected by a mix of countervailing forces, I see good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones.
The translation is fairly simple: Each quarter, the Federal Open Market Committee releases its Summary of Economic Projections, which is basically where members feel the economy is going and what the likely path of the Fed's interest rate target will be.

At the March meeting, FOMC officials indicated that two rate hikes are likely this year. Yellen's remarks indicate her opinion has not changed since then.

"That's still her sense. She's still cautiously optimistic about the economy," said David Blitzer, chairman and managing director at S&P Dow Jones Indices. "She's just watching the data, and right now if anyone could read her mind she's still expecting two rate hikes before the end of the year."

With the chair highly adept so far at consensus building, the likelihood should increase that the Fed will move twice, even though it's something the market currently does not expect.

After the Yellen speech, the market was assigning very little chance of a hike this summer — just a 4 percent probability for June and 31 percent for July. September had a 52 percent probability, just as it did before the speech. But the CME's Fed tracker was indicating just a 21 percent chance for a second hike by December.
"What you're seeing in Yellen's comments today is the Fed is not willing to abandon the promise of at least two rate hikes later this year," said Michael Arone, chief investment strategist for State Street Global Advisors. "The Fed's saying, hold on a minute, there are a number of positives that are occurring and we're holding tight to the idea that we could be raising rates a couple times this year."

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« Reply #125 on: June 07, 2016, 07:27:31 AM »

Tuesday, 7 June 2016 | MYT 1:53 AM
Fed’s Yellen sees rates hikes, mostly good economic picture

 "One should never attach too much significance to any single monthly report,” Yellen says regarding last week's US jobs report. - AFP pic
"One should never attach too much significance to any single monthly report,” Yellen says regarding last week's US jobs report. - AFP pic
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PHILADELPHIA: Federal Reserve chair Janet Yellen said on Monday that interest rate hikes are likely on the way because “positive economic forces have outweighed the negative” for the United States now that risks from earlier this year have diminished.

In the last public comment from any US central banker before a key policy meeting next week, the Fed chief said last month’s jobs report was “disappointing” and bears watching, though she warned against attaching too much significance to it on its own.

In her address, Yellen was careful not to give timelines on raising interest rates, in contrast to a speech on May 27, when she said “probably in coming months such a move would be appropriate.”

While on Monday Yellen stressed that surprises could emerge that could change her expectations, the speech was broadly buoyant, with Yellen listing four main risks to the US economy - slower demand and productivity, and inflation and overseas risks - before downplaying them all.

“If incoming data are consistent with labour market conditions strengthening and inflation making progress toward our 2% objective, as I expect, further gradual increases in the federal funds rate are likely to be appropriate,” Yellen said at the World Affairs Council of Philadelphia.

The US central bank raised rates from near zero in December in the first US policy tightening in nearly a decade.

Prospects of another hike this month were all but killed by a report last week showing only 38,000 jobs were created in May, somewhat muting recent upbeat data on consumer spending, housing and overall US growth.

Although the report was “concerning, let me emphasise that one should never attach too much significance to any single monthly report,” Yellen said. “Other timely indicators from the labor market have been more positive.”

Amid the “countervailing forces,” she said, “I see good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones. As a result, I expect the economic expansion to continue, with the labour market improving further and GDP growing moderately.”

Economists now see September or possibly July as the most likely time for a quarter-point policy tightening, while traders in futures markets are betting on later in the year.

The dollar initially rose following Yellen’s comments but later retraced, and financial markets did not give an appreciable signal on whether investors saw more or less chances of a rate hike in the near future. US stock prices were about flat compared to their levels just before the speech.

While Yellen did not repeat her line from a week-and-a-half ago when she said rate hikes would probably be appropriate in coming months, she said she remained optimistic inflation would rise to the Fed’s 2% goal because oil prices had reversed their downward path and the dollar had steadied after a long period of gains. - Reuter

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« Reply #126 on: June 08, 2016, 05:46:13 AM »

Bernanke Blew It Big-Time: He Should Have Raised Rates Three Years Ago

Tyler Durden's picture
by Tyler Durden - Jun 7, 2016 9:35 AM
Submitted by Charles Hugh Smith from Of Two Minds

* * *

Bernanke blew it big-time, letting the "recovery" run seven years without any significant increase in rates.

It is now painfully obvious that Ben Bernanke blew it big-time by not raising rates three years ago when the economy and markets enjoyed tailwinds. The former Federal Reserve chairperson, who has claimed the mantle of savior of the global economy, foolishly kept rates at zero until tailwinds turned to headwinds, at which point he handed Janet Yellen the unenviable task of raising rates as the headwinds are strengthening.

Ben Bernanke is not the savior who rescued the global economy; he is the clueless fool who plunged a poisoned knife in its back. After weathering the spot of bother in Euroland in 2011-2012, the global economy had multiple tailwinds in 2013--tailwinds that enabled Bernanke and the Fed to raise rates in a series of measured steps.

Tailwind #1: the Fed's binge-buying of assets (QE3) was still ramping up in 2013:


Tailwind #2: the yield curve spread had bounced off its 2012 low:


Tailwind #3: market speculative positions and sentiment were solidly positive:


Tailwind #4: China's economy and appreciation of the yuan had not yet weakened:

In April 2013, the market's "recovery" had already been running for four years. By mid-2013, the S&P 500 had soared from 667 in March 2009 to 1,600, exceeding its previous all-time highs around 1,574--a gain of 930 points or 140% off the 2009 lows.

What else did The Bernank want in mid-2013--an infinite line of credit with the Central Bank of Mars? He had literally every tailwind a central banker could want to support higher interest rates--especially rates that could have clicked higher by tiny .25% increments.

Instead, Bernanke blew it big-time, letting the "recovery" run seven years without any significant increase in rates. Now that the "recovery" is in its eighth year, it's starting to roll over. All those tailwinds have reversed into headwinds, especially China, which has seen the RMB (yuan) strengthen by 20% as its currency peg to the U.S. dollar has dragged it higher.

The 20% appreciation in the yuan makes China's exports increasingly costly and thus less competitive globally.

As I explained in Why the Fed Has to Raise Rates (December 4, 2015), the U.S. dollar serves two sets of users: the domestic U.S. economy and the international economy that uses the USD as a reserve currency.

While the Fed poo-bahs are constantly spewing propaganda about how the Fed serves Main Street (well, it does serve Main Street in a manner of speaking--as a tasty snack to Wall Street), the one absolutely critical mission of the Fed in the Imperial Project is maintaining U.S. dollar hegemony.

No nation ever achieved global hegemony by weakening its currency. Hegemony requires a strong currency, for the ultimate competitive advantage is trading fiat currency that has been created out of thin air for real commodities and goods.

Generating currency out of thin air and trading it for tangible goods is the definition of hegemony. Is there is any greater magic power than that?

In essence, the Fed must raise rates to maintain the U.S. dollar hegemony and keep commodities such as oil cheap for American consumers. The most direct way to keep commodities cheap is to strengthen one's currency, which makes commodities extracted in other nations cheaper by raising the purchasing power of the domestic economy on the global stage.

Another critical element of U.S. hegemony is to be the dumping ground for exports of our trading partners. By strengthening the dollar, the Fed increases the purchasing power of everyone who holds USD. This lowers the cost of goods imported from nations with weakening currencies, who are more than willing to trade their commodities and goods for fiat USD.

The loser as the USD strengthens is China, which must devalue its currency or de-peg its currency from the USD to preserve its export-sector competitiveness. Anything that could disrupt China's fragile economy, credit expansion and capital flows is a global worry, and Bernanke blew it big-time by not raising rates when global growth was still a tailwind.

Now that the tailwinds have become headwinds, the global economy is like a cracked glass teetering on a fence post in a rising storm. Every move in interest rates has immediate consequences in currencies, bond yields and capital flows, and each of these winds has the potential to topple the increasingly fragile global economy into recession--or worse.

Ben Bernanke blew it big-time, not just for America, but for the world. This reality cannot be dismissed as the luxury of hindsight; it was clear to many observers that after four years of recovery, it was time to start raising rates in 2013. Leaders must lead; if the Fed chair is so weak-kneed that he/she must ask the market's permission for every decision, that's not leading--it's following a short-term profit-obsessed liquidity junkie off the cliff

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« Reply #127 on: June 08, 2016, 05:47:44 AM »

Is the Fed Outright Buying Stocks/Futures to Prop Up the Markets?

Phoenix Capital Research's picture
by Phoenix Capital... - Jun 7, 2016 7:41 AM
“Someone” is getting desperate.

Throughout the last week, anytime stocks have begun to correct or drop, “someone” has bought S&P 500 futures to prop the market up.

Anyone who’s been involved with the markets for a while knows the difference between real buyers and manipulation. This is manipulation plain and simple.

Look at all those “V” rallies. Three days in a row stocks opened DOWN and someone immediately stepped in and began buying aggressively.

Another tell-tale sign of manipulation: the buying halts almost the moment stocks get to 2,100 on the S&P 500. At this point the manipulation ends. And because there are few REAL investors buying stocks at these levels, the market immediately retreats.

Could it be that the Fed or Plunge Protection Team is aware that earnings are collapsing… signaling that this stock market bubble is ready to burst?

Or that the US economy fell off a cliff a few months ago? We're now almost assuredly in a recession.

Indeed, the number of data points that are "the worst since 2008-2009" is staggering...

This whole mess feels just like the end of 2007/ beginning of 2008 to me.

On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide

In it, we outline precisely how the coming crash will unfold, as well as which investments will perform best, including “crash” insurance trades that will pay out big returns during a market collapse.

We are giving away just 1,000 copies of this report for FREE to the public.

To pick yours up swing by:

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

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« Reply #128 on: June 09, 2016, 02:06:43 PM »

MENT METHODS No Hurry, But Rate Hike Looms For Sometime This Year (Maybe)
ByPYMNTSPosted on June 8, 2016 Federal Reserve interest rates
June is out. July looks iffy. But keep an eye out for, possibly, one and done for a Fed boost.
One and done. Or two and through.

One of Wall Street’s favorite parlor games is to guess when rate hikes are in the offing and when they are not. The game has some real consequences, as it affects the directions of both the stock and bond markets.

So, for Fed interest rate hikes, as is the case with so much else in life, timing is everything. We’ve already picked over the jobs report that sparked a (minor) tizzy last week, and with the conventional wisdom that a hike is off the table in June, the question remains as to whether July is the magic month or whether some other later date will be.

The fact that Treasury prices rose a bit on Tuesday (June 7), with the attendant effect of pushing yields lower, shows that the yield on the two-year Treasury is at its lowest level since the middle of May. Last week, Fed Chair Janet Yellen sidestepped at least some language that was (carefully) disseminated, which said the Fed would likely raise rates within the next couple of months (which means now and beyond).

Lo and behold, that same language has been struck from the most recent commentary, and the dismal jobs report makes it dead certain, pretty much, that nothing is going to happen next week. The odds of a July hike may be sinking, too, as we’d likely have to make sure that the “38,000 awful headlines that we hope are not true” event from last week proves to be a one-off. Maybe it isn’t, as the two months before that were downwardly revised, too.

Where does that lead us for a rate hike? The most recent curve in the roadmap came from remarks just disclosed from the beginning of this week, where Yellen stated: “I see good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones.”

Translation: It seems that the latest jobs data, in her eyes, is a fluke or, barring flukiness, remains only a piece of the puzzle and not the biggest piece. Inflation still remains low enough that it alone would not be the other determining factor on its own. But the Fed telegraphed two rate hikes this year, which means that some movement is likely, barring a major economic data point that looks to be catastrophic. The onus seems to be on the data, with a central bank’s collective mind already made up, looking for positive reinforcement for a rate hike

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« Reply #129 on: June 13, 2016, 03:45:18 PM »

Rate-hike probability plummets
Jun 11 2016, 09:13 ET | By: Stephen Alpher, SA News Editor  Contact this editor with comments or a news tip

The day prior to May's weak employment report, Fed Funds futures put the probability of June or July rate hikes at 20.6% and 60%, respectively.Markets haven't exactly been jittery since, but there's certainly been a global rush into government paper over the past week, with yields on Swiss and Japanese 10-year bonds falling even deeper into negative territory, and those on German 10-year Bunds threatening to go into the minus column. The 10-year U.S. Treasury yield is a towering 1.64%, but has now fallen below the level of Feb. 11 - the bottom of the panicky start to 2016.As for a rate hike, forget about it in June, according to Fed Funds futures, which now put the probability of a move next week at less than 2%. July? Now, just about a 20% chance.In fact one would now have to go all the way out to December to find short-term rate punters expecting more than a 50% chance of the Fed lifting rates

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« Reply #130 on: June 14, 2016, 08:11:40 AM »

click here
Fed Hikes Ahead? Here's What Janet Yellen is Watching
By Kate Gibson, CBS MoneyWatch
Published 06/13 2016 11:38AMUpdated 06/13 2016 11:38AM
Photo from MGN Online


With the next interest rate decision coming from the Federal Reserve on Wednesday, Wall Street is voicing some distress that Janet Yellen is overly ambiguous about the path of the Fed's monetary policy.

"There's a little criticism starting to stir, that she's not very clear about what matters the most to her or other members of Federal Open Market Committee (FOMC)," said Hugh Johnson of Hugh Johnson Advisors.

Charles Plosser, a former Philadelphia Fed president, has described as a "problem" the desire to reach consensus on FOMC statements that he believes has made them "more vague and uncommunicative."

Yellen reinforced the notion in a recent speech in Philadelphia, saying investors should not count on the Fed to map out its plan for rate hikes. "The best we can legitimately do is explain what factors are guiding our thinking," Yellen said.

"Charlie Plosser and a lot of others would like her to be more transparent. They're saying something just short of 'tell us what you're going to do,' which is unreasonable at best. They [Fed members] don't know until they get into the meeting," Johnson said of the FOMC, which begins its two-day policy-setting session Tuesday.

"I think those rumblings are unfounded. I think she's been abundantly clear," Johnson said, referring to Yellen's frequently repeated refrain that Fed moves are data-dependent.

"The data she depends on are inflation numbers and employment numbers," Johnson said.

The Fed has also made clear that it's looking to hike borrowing costs, with its stated strategy most recently derailed by the shockingly poor May jobs report, showing the economy added only 38,000 jobs in the month, the softest figure in nearly six years.

"It isn't written in stone, but for the most part we have all the data we need to make a good guess," Johnson said. "Based on the employment numbers, based on the inflation numbers and based on other uncertain international incidents, I would be inclined to guess they are not going to raise in June."

The Fed is eager to normalize, and would love to increase rates two to three times this year, according to Tom Anderson, chief investment officer at Boston Private Wealth. But he added, "they need the data to show up in a certain way to make the market digest their decisions better."

Yellen and her colleagues are under pressure to raise rates, in large part because if the economy runs into trouble they need to have some room to lower them again.

The Fed is looking to avoid a scenario where they "don't have any arrows in their quiver" should it appear the economy is headed into a recession a year or so down the road, Jim Russell, principal and portfolio manager at Bahl & Gaynor, said.

What's needed, in Anderson's view, is a good jobs number for June, a slightly higher inflation number or further growth in wages. "If we get any positive data points that would support the case for raising, July is a definite possibility. If not then, they'll be looking at September."

"The jobs report was weak, but the overall employment data has been consistently in the right direction," Anderson said. "The trend has been in favor of a hike."

"By any objective measure, 4.7 percent, that is full employment," Russell said of the nation's unemployment rate. "And it does appear that the inflation rate is starting to increase a bit, to a level where they need to cut off extraordinary accommodation."

If the June jobs report shows the May report was "not a fluke, then we'll have an entirely different conversation," Anderson said.

However, Johnson also pointed out that "The numbers don't tell you everything. Yellen thinks broadly about what's going on in the world. She cares about the dollar, she cares about Brexit, she cares about the global financial markets and what's going on in China."

So long as the U.K. remains in the European Union and the June nonfarm payrolls numbers don't confirm a trend that May's awful numbers imply, the Fed will hike two times in 2016, Johnson and Russell believe. Anderson thinks Yellen & Co. will move only once before the end of the year.

"My guess would be July and October," Johnson said.

"They'd love to hike two times. I think they'll only hike once," Anderson offered.

The June 23 vote that determines whether Britain remains in the European Union is a major factor in the Fed's calculations, followed by the release of June employment numbers in early July.

"By July we'll have the Brexit vote behind us and a second data point on nonfarm payrolls. Should the Brexit vote go with the U.K. staying in the EU and should the jobs numbers bounce back, that probably gives the Fed license to take rates up a notch here," said Russell. He believes the first hike is likely in July and the second likely in December.

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« Reply #131 on: June 14, 2016, 03:02:41 PM »

US Fed should not delay 'normalisation' with further stay of rate hike: Nanyang B-school professor
By Chan Chao Peh /   | June 14, 2016 : 1:38 PM MYT   
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Translated by Google Translator:
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SINGAPORE (June 14): With disappointing US job growth numbers for May and growing concerns over “Brexit”, the possibility of a June rate hike by the US Fed has eased.

However, from the perspective of associate professor Lee Boon Keng from the Nanyang Business School, such a decision is “fundamentally flawed” on several levels.

Lee acknowledges that the lower-than-expected job growth numbers have to be taken into proper context. While numbers for May were indeed a surprise, it was on the back of rather steady job market which has been on a monthly average of 170,000, which is above the Fed’s aim of 100,000.



Unemployment, down a mere 0.3 percentage points, stood at 4.7%. On the other hand, American workers are enjoying higher salaries, with wages up 2.5% y-o-y.

“More importantly, weekly jobless claims, a leading indicator, remain at levels low enough to indicate that labour market is tight and wages will only edge higher,” states Lee.

Lee also debunks claims of the absence of inflation. He points out that core CPI inflation has been above the Fed’s own 2% target for the six months to May, which is taking place even with oil prices coming down.

In addition, inflation can be seen happening via the ISM prices index, which measures prices businesses pay for goods and services. For one, ISM prices paid by manufacturers are at their highest since June 2011, when oil was at US$100 (S$136), and not US$50 now.

Lee also notes that US real GDP growth has reached 2.4% for the past two years, which is higher than the Fed’s long term projection of 2%. “When the market says growth is anaemic, it is in comparison to pre-Lehman crisis years where it was clearly unsustainable. That is why we got into a crisis,” he states.

Lastly, the US economy is not going to be the next Japan, which therefore gives “absolutely no reason” for interest rates to remain so low for so long, states Lee.

“There is no perfect moment to wean the market, especially emerging markets, off the opioid of cheap liquidity. The notion that wealth creation through cheap credit will drive general economic good is a flawed argument. The more likely outcome is widening income divide that creates social instability that could result in isolationism. The Fed is simply wrong to delay normalisation any longer,” he adds

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« Reply #132 on: June 16, 2016, 06:00:26 AM »

Fed tells market: We're taking summer off
Patti Domm   | @pattidomm
2 Hours Ago
COMMENTSJoin the Discussion
Janet Yellen
Getty Images
Janet Yellen
The Federal Reserve sent a strong signal that it now expects only one interest rate hike this year, and the market now sees less than a 50 percent chance of even one rise by year-end.

The Fed's post-meeting statement and new forecast did not contain many surprises, and stocks held steady, but the two-year Treasury note, most sensitive to Fed news, rallied hard. The dollar fell slightly.

The U.S. central bank continued to lean toward hiking rates, but the Fed's "dot plot," which contains the interest rate forecasts of Fed officials, shows that six members now believe there will be just one rate rise this year, up from one member in March. Even though the central bank's official forecast still shows two rate hikes, Fed watchers took the increase in sentiment for one hike as a more important indicator.

"It should point to a weaker dollar, and the thing is, now the next event is Brexit, so it's hard to see a lot of people fighting the moves that are now underway," said John Briggs, head of strategy at RBS. "As much as anything, it kind of validates where the market is, but doesn't mean (bond yields can't fall further) if we get more worried about Brexit."

The Fed also lowered its outlook for rate hikes into the future. Central bank officials are now looking for the funds rate to rise to 1.6 percent in 2017, as opposed to the 1.9 percent estimate from March, and to 2.4 percent in 2017, from a 3.0 percent estimate previously.

Fed watchers continues to expect a hike, more likely now for September or December than July. According to RBS, futures markets now indicate just a 44 percent chance of a rate hike by the December meeting.

"I think the consensus has been moving that way for some time. You have one more rate hike, and then it just becomes a guessing game," said Scott Clemons, chief investment strategist at Brown Brothers Harriman. "I think the Fed needed to, and they accomplished with the language of the press release that they're keeping a July rate hike on the table."

However, Clemons said he believes September is much more likely for the next hike.

"There's not enough inflationary pressures to make them do it" sooner, said Clemons. "Time is their friend."

Fed watchers had seen the weak May jobs report, with only 38,000 nonfarm payrolls, as the main reason the central bank did not hike rates this week. But there has also been an increase in market worries about Brexit — the U.K. referendum, scheduled for next week, on whether to leave the European Union.

The Fed modified its statement to show "the pace of improvement in the labor market has slowed while economic activity appears to have picked up." It also pointed to growth in household spending.

Treasury yields have plumbed new levels as global bond markets have reacted recently to both Brexit and the easing of foreign central banks. The German 10-year bund this week fell below a zero yield for the first time ever. The U.S. 10-year on Wednesday was yielding 1.58 percent, still above its February low of 1.53 percent.

"In sum, the policy statement embodied no new information about the timing of the next rate hike in the normalization process, but leans very dovish," noted Ward McCarthy, chief financial economist at Jefferies.

"(Fed Chair) Janet Yellen may change our opinion, but right now we think that it is highly probable that there is again one rate hike in 2016, with December again being the most likely date," he wrote.

Respondents to CNBC's June Fed survey this week identified the jobs report as the biggest obstacle to a June hike, with global growth concerns second, and Brexit the third. The Fed did not point to Brexit in its statement but Yellen said in a briefing that it was something Fed officials considered.

Fifty-five percent said the jobs report was a statistical blip, but 35 percent said it was evidence of a new trend of lower employment growth. Forty percent said job growth was depressed because the economy is close to full employment, while 58 percent said they think employers are uncertain about the future.

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« Reply #133 on: June 16, 2016, 07:26:56 AM »

Thursday, 16 June 2016 | MYT 3:38 AM
Yellen says Brexit vote influenced Fed call to hold rates steady

 Yellen holds a news conference following the Fed’s two-day Federal Open Market Committee policy meeting. - Reuters pic
Yellen holds a news conference following the Fed’s two-day Federal Open Market Committee policy meeting. - Reuters pic
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WASHINGTON: Federal Reserve chair Janet Yellen said next week’s referendum in the UK on whether to remain in the European Union was a factor in the US central bank’s decision to hold interest rates steady at its meeting Wednesday in Washington.

“It is a decision that could have consequences for economic and financial conditions in global financial markets,” Yellen said during a press conference following the meeting. A vote on June 23 by Britons to leave the EU “could have consequences in turn for the US economic outlook,” she said.

Growing worries over a potential British exit have roiled financial markets, sending stocks lower around the globe in the past week, pushing investors into safe havens like German bonds and US Treasuries, and weakening the pound. Five opinion polls published this week showed “Leave” supporters ahead.

US Treasury Secretary Jacob J. Lew last week warned of repercussions to the global economy, while Bank of England (BOE) governor Mark Carney said a vote to exit might lead to a recession in the UK.

The BOE has begun a series of extra market operations aimed at boosting bank funding around the referendum. European Central Bank governing council member Ilmars Rimsevics said last week the bank was prepared to offer euro liquidity.

The UK joined the European Economic Community, a predecessor body to the EU, in 1973. It has the second-largest national economy within the 28-member group, behind Germany. - Bloomberg

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« Reply #134 on: June 16, 2016, 02:33:16 PM »

回應(0) 人氣(357) 收藏(0) 2016/06/16 11:30
MoneyDJ新聞 2016-06-16 11:30:05 記者 賴宏昌 報導
聯準會(FED)今年初還大談年內將升息4次、到現在卻是連一次都還沒升!為何會如此?且看FED主席葉倫(Janet Yellen;見圖)如何解釋!

FRED網站顯示,美國「未來五年之五年期預期通膨率(5-Year, 5-Year Forward Inflation Expectation Rate;簡稱:5y5y)」6月14日報1.45%、遠低於今年迄今最高點(4月28日的1.83%);2月11日報1.42%、創2009年3月10日(1.3%)以來新低。值得注意的是,在此之前只有在2007-2009年經濟衰退期間這項指標才曾低於1.70%。
葉倫曾多次公開談論美國生產力持續低迷這個話題。MarketWatch部落格報導,葉倫5月27日在與哈佛大學經濟學教授Gregory Mankiw(小布希政府時期白宮經濟顧問委員會主席)對談時用「悽慘(miserable)」這個字來形容美國生產力成長率、直稱這種現象是相當嚴重的負面發展。
美國勞動市場狀況指數(Labor Market Conditions Index;LMCI)2016年5月報-4.8、創2009年5月(-9.0)以來新低,連續第5個月呈現負值、創2007年5月至2009年6月以來最長低迷紀錄。
LMCI被稱為「賽非農(意指重要性可與非農業就業數據相比擬)」不是沒有原因的。華盛頓郵報記者Matt O`Brien 6月8日透過《Wonkblog》部落格發表專文指出,過去25年的歷史紀錄顯示,每當LMCI連續5個月(或更久)呈現負值,FED接下來的動作都是降息、而非升息

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« Reply #135 on: June 17, 2016, 05:58:05 AM »

Yellen Says Forces Holding Down Rates May Be Long Lasting
 Rich Miller
June 16, 2016 — 6:26 AM MYT
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Fed Scales Back Rate Projections

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Jo Cox shooting. Previously unreleased photo dated 12/05/15 of Labour MP Jo Cox, who has been shot in Birstall near Leeds, an eyewitness said. Issue date: Thursday June 16, 2016. See PA story POLICE MP. Photo credit should read: Yui Mok/PA Wire URN:26627450
U.K. Lawmaker Jo Cox Is Murdered, Silencing Brexit Debate
Pedestrians walk past the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Feb. 22, 2016. Stocks retreated with government bonds, while the euro rallied to the highest level in almost a month as investors looked past an unprecedented boost from European monetary policy to focus on rising anxiety that policymakers have lost the ability to jumpstart global growth and stave off deflation. Photographer: John Taggart/Bloomberg
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Jo Cox shooting. Police at the scene in Birstall, West Yorkshire, after Batley and Spen MP Jo Cox was shot, an eyewitness said. Picture date: Thursday June 16, 2016. An eyewitness said the 41-year-old mother of two was left lying in a pool of blood on the pavement after her assailant struck in Birstall. See PA story POLICE MP. Photo credit should read: Nigel Roddis/PA Wire URN:26628127
Brexit Campaigns Suspended After Labour Lawmaker Jo Cox Shot

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Fed chief discusses the ‘new normal’ that’s holding rates down
U.S. central bank scales back pace of projected rate rises
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Federal Reserve Chair Janet Yellen seems to be coming around to what her one-time rival, Lawrence Summers, has been arguing for a while: Some of the forces holding down interest rates may be long-lasting and secular.
The Fed Lifts Off
That’s reflected in a marked downgrade in rate projections released by policy makers after their meeting on Wednesday. Six of 17 now only see one rise this year, after the central bank lifted rates effectively from zero in December.

Officials also slowed the pace of expected moves in both 2017 and 2018: They now only foresee three increases in each of those years, down from the four they expected in March, according to their latest median forecast.
Yellen in the past has ascribed the low level of rates mainly to lingering headwinds from the financial crisis -- tight mortgage credit, for instance -- and suggested that they would dissipate over time.
On Wednesday, though, she also pointed to more permanent forces that could depress rates for longer, namely, slow productivity growth and aging societies, in the U.S. and throughout much of the world.
‘New Normal’
In a press conference after the Fed held policy steady, Yellen spoke of a sense that rates may be depressed by ”factors that are not going to be rapidly disappearing, but will be part of the new normal.”
Summers, who was in the running to get the Fed job before losing out to Yellen in 2013, has been contending for several years that the U.S. and other industrial countries are mired in “secular stagnation” of scant economic growth.
A key component of his argument: An excess supply of savings and a paucity of demand is depressing equilibrium interest rates in the advanced world, making it difficult for central banks to ease credit enough to lift growth and inflation.
The equilibrium, or neutral rate, is the one that balances the supply of and demand for savings in an economy. If a central bank wants to spur growth it has to cut rates below that level.
Signing On
Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, said Yellen seemed to be signing on to Summers’ argument when it comes to rates but not to growth.
“I think she’s embraced the new neutral, new normal -- whatever you want to call it -- as it relates to the funds rate, but perhaps not to growth,” he said, noting that the Fed’s long-run economic forecasts for 2 percent growth were untouched.
“It’s not quite as pessimistic as Summers, but they’re definitely conceding a little that lower productivity could be here for a while,” said Feroli, who lowered his forecast for Fed hikes this year to one from two following the press conference.
In a blog posting Tuesday, former Treasury Secretary Summers likened the Fed’s actions in recent month to “Groundhog Day.” It keeps poking its head up hoping to raise interest rates only to back away in the end.
Summers, now a professor at Harvard University, has argued in the past that the Fed should not raise rates until its see the “whites” of the eyes of inflation.
On Hold
At least one Fed policy makers seems to be listening, based on the so-called dot plot of Fed officials’ rate forecasts released today. The official sees the Fed holding rates steady in 2017 and 2018 after raising them once this year.
In contrast, Yellen said many Fed policy makers expect to increase rates in the coming years as the headwinds from the financial crisis dissipate further.
She did though take note of other forces that could keep rates low for years. “There are also more long lasting or persistent factors that may be at work that are holding down the longer-run level of neutral rates,” she said.
Near Zero
Fed officials reduced their estimate of the long-run equilibrium federal funds rate to 3 percent from 3.25 percent in March, according the median forecast released on Wednesday. Yellen suggested though that for now, the neutral rate may be around zero, after taking account of inflation.
“Persistent slow growth despite a very low level of the nominal funds rate and the fact that the crisis was now seven or eight years ago has led the Fed to be more open to the idea of a new normal with lower interest rates,” said Jonathan Wright, an economics professor at Johns Hopkins University in Baltimore.
The debate over the appropriate stance of monetary policy -- and in particular the level of the equilibrium interest rate now and in the future -- is taking place against an international backdrop where rates have turned negative in many countries.
The yield on Germany’s 10-year government bund, Europe’s benchmark security, fell below zero for the first time on record on Tuesday, as investors sought safe-haven assets ahead of next week’s vote by the U.K. on whether to remain in the European Union.
Yellen said the U.K. referendum was a factor in the U.S. central bank’s decision to hold interest rates steady at its meeting Wednesday in Washington.
“It is a decision that could have consequences for economic and financial conditions in global financial markets,” she said. A vote on June 23 by Britons to leave the EU “could have consequences in turn for the U.S. economic outlook,” she said.
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« Reply #136 on: June 17, 2016, 05:59:14 AM »

Fed's Yellen acknowledges difficulty of escaping world's low rate grip

The Federal Reserve building in Washington September 1,  2015.  REUTERS/Kevin Lamarque
The Federal Reserve building in Washington September 1, 2015.
U.S. Federal Reserve Chair Janet Yellen holds a news conference following the Fed’s two-day Federal Open Market Committee (FOMC) policy meeting in Washington, June 15, 2016. REUTERS/Kevin Lamarque
U.S. Federal Reserve Chair Janet Yellen holds a news conference following the Fed’s two-day Federal Open Market Committee (FOMC) policy meeting in Washi...
A security guard walks in front of an image of the Federal Reserve following the two-day Federal Open Market Committee (FOMC) policy meeting in Washington, DC, U.S. on March 16, 2016.  REUTERS/Kevin Lamarque/File Photo
A security guard walks in front of an image of the Federal Reserve following the two-day Federal Open Market Committee (FOMC) policy meeting in Washingt...
The Federal Reserve building in Washington September 1,  2015.  REUTERS/Kevin Lamarque
The Federal Reserve building in Washington September 1, 2015.
U.S. Federal Reserve Chair Janet Yellen holds a news conference following the Fed’s two-day Federal Open Market Committee (FOMC) policy meeting in Washington, June 15, 2016. REUTERS/Kevin Lamarque
U.S. Federal Reserve Chair Janet Yellen holds a news conference following the Fed’s two-day Federal Open Market Committee (FOMC) policy meeting in Washi...

By Howard Schneider

WASHINGTON (Reuters) - Evidence that the U.S. neutral rate of interest remains stalled near zero spurred the Federal Reserve to slow its expected pace of rate hikes on Wednesday, as policymakers signaled their hands may be tied until a rebound in global demand or other forces raise that key measure of the economy’s underlying strength.

In a news conference following the Fed's latest meeting, Chair Janet Yellen said the central bank was still coming to grips with the likelihood that the neutral rate - the point at which monetary policy is neither spurring nor restraining economic growth - is stuck at a historic low and could limit the central banks room to maneuver.

In the Fed's policy debate, "an important influence is what will happen to that neutral rate," Yellen said, noting that the central bank's "base case" is that the rate should rise alongside an improving economy and as "headwinds" from the 2008-9 financial crisis fade.

But "there are long-lasting, more persistent factors that may be holding down the longer-run level of neutral rates," Yellen said.

"It could stay low for a prolonged time....All of us are in a process of constantly reevaluating where the neutral rate is going, and what you see is a downward shift over time, that more of what is causing this to be low are factors that will not be disappearing."

Policymakers nodded directly at the problem in fresh economic projections that cut median estimates of the long-run federal funds rate to 3 percent, far below the levels common in the 1990s. Since the Fed began publishing policymakers' economic projections in 2012, estimates of the long-run rate have been cut from 4.25 percent.

"There could be revisions in either direction," Yellen said. "A low neutral rate may be closer to the new normal."


Though difficult to pinpoint, estimates of the neutral rate provide a key yardstick to gauge whether a given federal funds level is stimulating or restricting the economy.

With the Fed still trying to encourage spending, investment and hiring, a low neutral rate means the Fed has less room to move before that stimulus is gone.

Fed estimates published online show little consistent movement in the neutral rate in recent years even as the labor market tightened and growth continued above trend, confounding expectations that it would move higher in an economy expanding beyond potential.


Officials cite a variety of possible explanations, but the result is the same: until policymakers are satisfied that the neutral rate is moving higher, they face an effective cap of 2 percent or even less on the federal funds rate.

Coupled with a 2 percent inflation rate, the Fed's target, that would put the "real" federal funds rate at zero. If inflation remains below target, the ceiling on the Fed would be that much lower as well.

That is a far cry from the 3.5 to 4 percent that the Fed's policy rate has averaged since the 1990s, and means the central bank will treat each move with particular caution, current and former Fed officials say. In their policy projections on Wednesday, Fed officials slowed the pace of expected future hikes from four to three per year.

It also means the central bank would be stuck near zero, and more likely to have to return to unconventional policy in a downturn; it could also force discussion of whether to raise the inflation target in order to try to push the entire rate structure higher.

The Fed has been waylaid more than once in its rate hike plans by the state of the global economy, and held steady again on Wednesday in part because of Britain's upcoming vote on whether to leave the European Union.

But recent data and Fed discussion of the neutral rate show the more chronic influence that low global rates and weak global growth may exert on the Fed.

According to the economic model typically cited by Yellen and others in discussing the neutral rate, conditions are ripe for it to move higher and give the Fed the room it needs to raise rates.

That model, developed by San Francisco Federal Reserve Bank President John Williams and the board's Monetary Affairs director Thomas Laubach, estimates that the inflation-adjusted size of the U.S. economy moved beyond its potential nearly two years ago, and that the positive "output gap" has been growing larger.

In general a larger output gap would produce a higher estimate of the neutral rate. However, in the time since the economy moved beyond potential in 2014, the model's estimate of the neutral rate has remained below zero in all but the first quarter of this year.


As the Fed contemplates when to move next, the dynamics working against it were obvious this week when the yield on Germany's 10-year bond dropped into negative territory, helping keep the spread between it and the U.S. 10-year Treasury note near a euro-era high.

That gap in risk-free yields, and the United State's general performance relative to Europe and Japan, has driven the dollar higher, curbed U.S. exports, and may have fed through to the recent hiring slowdown in the U.S. industrial sector - all factors that could help depress the neutral rate.

A move higher in U.S. target rates risks reinforcing those trends, likely leading the Fed to feel its way forward until Europe and Japan can also move from the zero lower bound - a day that may be far in the future.

"If anywhere along this path international conditions or skittishness become such that the dollar takes off and capital flows disrupt a weak world and all of that affects inflation and job gains, then we will have a real fundamental question for them to resolve," said Jon Faust, a Johns Hopkins University professor and former advisor to the Fed board.

"How hard do we push on going it alone?"

(Reporting by Howard Schneider; Editing by David Chance and Andrea Ricci)


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« Reply #137 on: June 17, 2016, 02:57:20 PM »

回應(0) 人氣(0) 收藏(0) 2016/06/17 14:21
MoneyDJ新聞 2016-06-17 14:21:35 記者 陳瑞哲 報導
聯準會(FED)周三暗示今年還不打算放棄升息計畫,根據資產管理公司Macquarie Wealth Management北美研究團隊表示,暑假結束後FED的第一件工作應該就是升息,機率比七月或十二月都高。




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« Reply #138 on: June 21, 2016, 02:17:45 PM »

Tyler Durden's picture
by Tyler Durden - Jun 20, 2016 7:35 PM
Authored by Bill Bonner of Bonner & Partners (annotated by's Pater Tenebrarum),

Myths Are Worth Wondering About
Wondering is what we do, here at the Diary, especially wondering about myths. “Myths” are not necessarily untrue. They just can’t be known or proven in the way, say, that Archimedes could prove that the king’s crown was made of gold.


Antiquity’s most famous patent troll Archimedes shortly after his famous epiphany in the bathtub


The Old Testament reports on God, for example, could be literally true, symbolically or metaphorically true, or complete fantasy. Unless you get hit on the head with a rock, or an angel speaks to you from a burning bush, you can’t know for sure.

Likewise, we can’t know for sure which candidate for president would be better. Poor Donald Trump is sinking in the polls; the media says his reckless comments are catching up with him. But who knows?

We can’t see into the future – only God can. So, we make our decisions based not on facts, but on which myths (assumptions and prejudices that can’t be tested) we believe.

In newspapers, elections, and most of public life, myths are more important than provable facts. They direct trillions of dollars of spending… and set off wars in which millions are killed.

The largest demonstration in history was in India, with millions of people taking to the streets to protest the killing of cows. In short, myths are worth wondering about. The Fed says it wants 2% consumer price inflation. But there is nothing scientific about it. Is 2% better than, say, 1%? Or no inflation at all? It is myth.

Last week, the prophet Janet brought forth the expected blah-blah. Sticking her neck out, she said the Brexit vote next week “could have consequences” for the financial system. Hey, what couldn’t?



Pronouncements from the monetary high priests have become the most important drivers of financial markets


Amor Fati
When you don’t want to do something, it’s not hard to find reasons not to do it. Don’t want to mow the lawn? The grass is too wet. Or it’s too late in the day. Or the lawnmower needs oil.

Don’t want to take a chance on raising rates? The British could vote to leave the European Union.

The Orioles could lose a home game. Or someone, somewhere could catch a cold on his way to work.

“Amor fati” was Nietzsche’s famous expression. Literally translated, it means “love of fate.”  It is a white shoe yearning for mud. It is a turkey looking forward to Thanksgiving. Or an investor stoically preparing for a bear market.



Famous German philosopher Friedrich Nietzsche, who with advancing age increasingly began to resemble a broom.


We use the term to describe the grace and courage you need to meet a complex, unknowable, and uncontrollable future. We are all human, all God’s fools… and all bound for the grave. No use going there with a sour look on your face! And no use pretending it isn’t so.


Deeply in Debt
Cowardice has been a sub-theme in the Diary for the last week or so. The Fed provides us with an illustration. Rather than own up to the mess it has made, it hides behind a silly and superficial myth – that it can protect the economy with centrally planned  interest rates.

And now, thanks largely to its own mismanagement, the world is deep in debt, with far too many people all over the world who earn far too little income to support it.

Every loan comes with a fuse. And the world now has $200 trillion worth of debt… and plenty of matches. Brexit is just one of them. Sooner or later, we’re going to see some fire and brimstone.

Ms. Yellen pretended not to notice last Wednesday. As we guessed, she wasn’t taking any chances. What may be significant is the market’s reaction. Until now, every time the Fed has dodged fate, investors bought stocks. They expected stocks to rise, in celebration of more EZ money.


1-DJIA, 10 min.

DJIA, 10 minute candles…the market actually fell right after the FOMC announcement. We’re not sure that’s even legal – click to enlarge.


In fact, even with today's exuberant Brexit ramp, the S&P remains barely green post-FOMC (even as crude soars), and is inderperforming Gold


Not this time. In Wednesday’s press announcement, Janet Yellen backed off her previous commitment to gradually raise rates and instead strongly hinted that interest rates may stay depressed for a long time.

But instead of rising on the news, the Dow registered its fifth straight day of decline.


Myth Magic
Yes, dear reader, it looks as though the Fed’s zero-interest-rate policy has finally lost its myth magic. There is now $10 trillion of government bonds trading at sub-zero yields. Corporate profits are falling. Productivity is falling.

And even with interest rates at a 5,000-year low, U.S. GDP growth has been falling for four straight quarters… and may already be running below zero. And that’s just in the U.S.

Europe is only barely limping along… with Britain possibly deserting the EU this week. Writes our old friend Rob Marstrand:

I believe the EU will fall apart over time, sooner or later and in one way or another. When it comes to investing, there will be winners and losers along the way, so it’s something that needs to be watched.
According to the Pew survey, the majority of people in Britain, Greece, France and Spain have an unfavorable opinion of the EU. And opinion in Germany and the Netherlands is only slightly in favor of the EU.


The EU gets no love anymore…


Taking Up the Slack
Meanwhile, China’s problems grow. While the whole world adds debt – by trying to stimulate consumer “demand” – China adds debt to stimulate “capacity,” so it can make more things for foreigners who can’t pay for them.

Officially, the Chinese central bankers have announced their own insight into amor fati. You can’t fix a problem caused by over-investment by providing more cheap investment capital, they said.

Although this sounds as though they are ready to turn away from the errors and omissions of the past, the banks keep lending and builders keep building.



Lots of empty buildings? No problem, let’s build more!


Already, there is not enough aggregate demand in the whole world to absorb all that capacity, says Richard Duncan, editor of “big picture” advisory service MacroWatch.

And there’s no way local buying is going to take up the slack. The Chinese can’t afford to buy more stuff either. The average wage in the Middle Kingdom is just $8.13 a day – far too little to sustain a big increase in domestic demand.

What will happen next? What fatum is coming?

Watch this space!


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« Reply #139 on: June 22, 2016, 08:59:47 AM »

回應(0) 人氣(21) 收藏(0) 2016/06/22 08:03
MoneyDJ新聞 2016-06-22 08:03:05 記者 賴宏昌 報導
Thomson Reuters報導,聯準會(FED)主席葉倫(Janet Yellen;見圖)21日在美國國會作證時表示,今年內是否能夠升息關鍵可能在於就業市場有沒有辦法出現反彈。她說,過去數個月許多指標無疑顯示經濟轉好的動能出現下滑跡象,在進一步升息前美國經濟必須先觸底反彈。葉倫這番談話顯示聯準會不太可能在7月底宣布升息,因為在此之前僅有一份新的月度就業報告可以進行判讀。
共和黨準總統參選人川普(Donald Trump)先前曾說如果他當選總統,當景氣不好時、他會想辦法跟債權人協商減債。葉倫說,被世人普遍視為無風險的有價證券如果出現違約疑慮、那將會有嚴重的後果。

MarketWatch部落格報導,葉倫5月27日在與哈佛大學經濟學教授Gregory Mankiw(小布希政府時期白宮經濟顧問委員會主席)對談時用「悽慘(miserable)」這個字來形容美國生產力成長率、直稱這種現象是相當嚴重的負面發展。
葉倫關注的美國勞動市場狀況指數(Labor Market Conditions Index;LMCI)2016年5月報-4.8、創2009年5月(-9.0)以來新低,連續第5個月呈現負值、創2007年5月至2009年6月以來最長低迷紀錄。
LMCI被稱為「賽非農(意指重要性可與非農業就業數據相比擬)」不是沒有原因的。華盛頓郵報記者Matt O`Brien 6月8日透過《Wonkblog》部落格發表專文指出,過去25年的歷史紀錄顯示,每當LMCI連續5個月(或更久)呈現負值,FED接下來的動作都是降息、而非升息。

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« Reply #140 on: June 22, 2016, 09:06:18 AM »

Fed cautious on rates due to Brexit, U.S. hiring slowdown -Yellen
By Reuters / Reuters   | June 22, 2016 : 8:21 AM MYT   
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WASHINGTON (June 22): The Federal Reserve's ability to raise interest rates this year may hinge on a rebound in hiring that would convince policymakers the U.S. economy is not faltering, Fed Chair Janet Yellen told lawmakers on Tuesday.

In testimony before Congress that expressed general optimism about the economy and played down the risk of a recession, Yellen nevertheless said the Fed will be cautious about interest rate increases until it is clear the job market is holding up.

Immediate risks, like the potential fallout from Britain's June 23 vote on whether to leave the European Union, could darken the U.S. economic outlook, she told the Senate Banking Committee, as could a downturn in productivity growth that may prove a permanent drag on the economy.

"Without a doubt, in the last several months a number of different metrics suggest ... a loss of momentum in terms of the pace of improvement," Yellen said. "We believe that will turn around, we expect it to turn around, but we are taking a cautious approach and watching very carefully to make sure that that expectation is borne out before we proceed to raise interest rates further."

Her comments suggest the U.S. central bank is unlikely to raise rates at its next policy meeting in late July, since it will only have one additional monthly employment report in hand by that time.

They also demonstrate how a new sense of uncertainty has taken root as Fed policymakers come to grips with a broadening realization that the economy's potential appears to be weaker than previously thought.

In a generally civil 2-1/2-hour hearing, Yellen was questioned less about those long-run economic issues and more about the immediate economic and political concerns of panel members: why agricultural prices were so low, why there were so many white men in charge of the Fed's regional reserve banks, and why there was so much income inequality.

Asked about presumptive Republican presidential nominee Donald Trump's suggestion the United States could lower its national debt by buying back securities at a discount, Yellen said any move that smacks of a default for a security generally viewed by the world as risk-free would have "severe" consequences.

Her comments largely tracked the Fed's policy statement last week and the press conference that followed.

"It's a rehash. The underlying message is a continuation of the trend that the Fed is moving toward a more cautious stance to support this economic expansion with the fragility of the economic backdrop," said Robert Tipp, chief investment strategist at Prudential Fixed Income in Newark, New Jersey.

U.S. Treasury yields had risen to session highs by the end of Yellen's testimony, while stocks on Wall Street were trading higher. U.S. rates futures implied traders saw a 12 percent chance of the Fed raising rates in July, little changed from Monday. The dollar was stronger against a basket of currencies.


There was more explicit attention during Yellen's testimony to the possible implications of the "Brexit" vote, which she said could have "significant repercussions."

Asked if Britain's departure from the EU could trigger a recession in the United States, Yellen said: "I don't think that is the most likely case, but we just don't really know what will happen and we will have to watch very carefully."

Although the outcome of the British referendum will be known this week, the jobs issue may take longer to sort out.

Fed officials have said they expected U.S. job growth to slow from the average 200,000 per month typically seen during the post-financial crisis recovery. But the drop to an average of 80,000 in April and May was particularly sharp and put the economy below the level of job creation the Fed considers necessary to accommodate new labor force entrants.

In her testimony, Yellen called the slowdown likely a "transitory" phenomenon.

But concerns the hiring slowdown may be longer-lasting, coupled with a lowered sense of U.S. economic potential, mean the Fed's benchmark overnight interest rate is likely to remain low "for some time" Yellen said.

Current Fed policymakers' projections foresee two rate increases this year and three each in 2017 and 2018, a slower pace from what was forecast in March.

Yellen will appear before a House committee on Wednesday to complete her semi-annual testimony before Congress. - Reuter

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« Reply #141 on: June 25, 2016, 09:36:06 AM »

Fed Credibility Collapses - Rate-Cut Now More Likely For Next Year

Tyler Durden's picture
by Tyler Durden
Jun 24, 2016 3:40 PM
Just when you thought The Fed's credibility could not drop any further... it does. For the first time since the financial crisis, the market now sees a greater probability of a rate cut than a rate hike... for the next year.


As rate-hike odds collapse...


In fact, "bets" on an eventual dip into NIRP have surged to record highs, and we suspect even higher today...

[the chart shows the cumulative open interest in par calls on eurodollar futures contracts that expire in 2016 and 2017 - basically options on short-term interest rates with a strike price of zero, such that they pay out if the Fed takes rates negative

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« Reply #142 on: June 25, 2016, 09:54:40 AM »

Brexit vote means Fed stays put
9 hours ago
 Yellen testifies before the Senate Banking Committee at Capitol Hill in Washington
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Federal Reserve Board Chair Janet Yellen testifies before the Senate Banking Committee at Capitol Hill in Washington, U.S., June 21, 2016. REUTERS/Carlos Barria -

By Ann Saphir

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SAN FRANCISCO (Reuters) - Britain's vote to leave the European Union has thrown financial markets into turmoil and means the U.S. Federal Reserve's ambitions for two rate rises this year have been placed on hold.

The Fed on Friday sought to reassure markets that it would provide liquidity as needed using swap lines in place with other central banks, including the Bank of England as the pound touched a 1985 low against the dollar, world stocks lost more than $2 trillion of their value, and investors rushed for the safety of U.S. Treasuries, pushing the yield on the benchmark 10-year note to a four-year low.

Traders of U.S.-interest rate futures even began to price in a small chance of a Fed rate cut, and now see little chance of any rate hike until the end of next year.

"One can forget about rate hikes in the near term," said Thomas Costerg, New York-based economist at Standard Chartered Bank. "What I'm worried about is that the Brexit vote could be the straw that breaks the back of the U.S. growth picture."

Market volatility in the past year, a stronger U.S. dollar in the past couple of years that has crimped exporters' profits, low oil prices and inflation, and weaker economic growth in U.S. trading partners have kept Fed monetary policy on hold at least twice in the past year.

An interview with Kansas City Fed President Esther George published Friday but conducted before the Brexit outcome was known suggested she still believes U.S. rates need to rise soon.

But comments from other Fed officials in the run-up to the referendum suggest they worried about exactly the kinds of shocks that rippled through financial markets on Friday.

Fed Chair Janet Yellen had warned prior to the vote that Brexit could "negatively affect financial conditions and the U.S. economic outlook".

The question now for the Fed and for central banks globally is how long the shock lasts and how far it spreads. Many investors and economists are worried that the exit vote could stall Europe's faltering growth.

"It depends on how bad things would get and for how long they would stay bad," said Roberto Perli, a partner at Cornerstone Macro LLC and a former Fed staffer. "The problem with trying to handicap outcomes here is that there are too many unknowable unknowns."

A British departure from the now 28-member EU will deprive it of its second-biggest economy and one of the most liberal states, economically.


Joe Gagnon, a senior fellow at the Peterson Institute for International Economics, had thought the Fed would raise rates once this year.

Brexit, however, will throw the UK into recession, and crimp U.S. exports, payrolls expansion and economic growth by "the equivalent of at least a 25 basis point hike" in Fed interest rates. "It could mean no rate hikes this year," Gagnon said.

If the slowdown deals a severe blow to Europe, which in Gagnon's view is a less likely outcome, the Fed could be forced to delay interest rate rises further.

Global events have repeatedly stayed the hand of the Yellen Fed, which is already loath to do anything to curtail what has been a modest recovery from a deep recession in 2008.

In late 2015 the Federal Reserve deferred an expected interest rate rise after global markets swooned in response to an unanticipated slowdown in China's economy.

Earlier this year, Fed officials cited tighter financial conditions brought on by further heightened worries about China as another reason for caution.

Still, few economists expect the United States to tip into recession as a result of this week's vote. And if growth in U.S. employment, wages, inflation and overall economic output continues, the Fed will need to raise interest rates at some point, even though the full impact of Brexit won't be known for years.

"(Fed policymakers) can’t just put policy on hold for several years – that’s not going to happen," Gagnon said.

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« Reply #143 on: June 25, 2016, 08:23:54 PM »

Moran Questions Fed Chair Janet Yellen on Strength of Economic Recovery

Screen Shot 2016-06-23 at 8.45.57 PMWASHINGTON – U.S. Senator Jerry Moran (R-Kan.), member of the Senate Banking Committee, this week questioned Federal Reserve Chair Janet Yellen about the value of the U.S. dollar, its impact on commodity pricing, and the strength of our economic recovery.  Watch the exchange here

“Kansans aren’t seeing our economy recover,” said Sen. Moran. “In my conversations with Kansans, I haven’t talked to many who see their economic future as brighter. They don’t feel more secure in their jobs. They’re worried about having opportunities for their kids when they graduate from school and about whether or not their kids can pay back their loans. They’re worried they can’t save for their own retirement or for healthcare emergencies. The sense of an economic recovery is far from being felt universally.”

In her testimony and again in response to Sen. Moran’s questioning about economic strength and the value of our dollar, specifically in relation to prices for agricultural commodities, Chairwoman Yellen admitted that business investment outside the energy sector has been “surprisingly weak.” She cited “slow growth and a less rapid increase in the labor force” as possible explanations for generally overall weak investment spending.

Sen. Moran continued, “Chairwoman Yellen’s testimony helps us understand the Federal Reserve’s thinking on how to strengthen our economy. It’s clear that when business owners are hit with regulation after regulation, when the Department of Labor ignores productivity and free market wages, and when potential entrepreneurs can’t see a path to success, Americans will remain out of work and worried about their futures.”

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« Reply #144 on: June 25, 2016, 09:03:37 PM »

How Brexit Is Bailing Out The Fed
Jun. 24, 2016 4:00 PM ET| Includes: DIA, IEF, IWM, QQQ, SPY, UUP
Josh Arnold   Josh ArnoldFollow(5,778 followers)
Long/short equity
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The Fed has stuck to its two-hike guidance for this year.

But the Brexit is causing a massive shock across the world.

The Fed can use this to both save face and revise its guidance, something that wasn't possible prior.

Credit: Marketslant

As it turns out, the thing that everyone was afraid of but then decided wouldn't happen, well, did. Coverage of the now-infamous "Brexit" is all over the place and I'm not here to cover it, the vote, the reasons why or not or anything else about the actual event. However, it is having a profound impact on US interest rates which are of keen interest to me and surely many of you as it relates to financials. I've been a bull on financials for a long time (it gets harder and harder to admit that as time goes on) because I've believed the narrative coming from the Fed on hikes. However, as we all know, that hasn't worked out particularly well. At this point, it is far more fashionable to hate the banks than to like them despite any valuation metric that suggests otherwise and after the Brexit vote and the sheer panic that has ensued, the banks are getting absolutely crushed.

I've gone on record saying that I have thought the Fed would still raise rates twice this year because that is what they've said they would do. That sounds daft but I think the Fed has lost credibility with markets and although they say they don't care about that, they clearly do; anyone that suggests otherwise should have his head examined. Given that, my theory was that the Fed would stubbornly stick to its revised two-hike guidance from earlier this year after it was roundly humiliated off of its short-lived four-hike guidance. That lasted about a minute and given that the Fed has repeatedly punted in the past few years on hikes, I thought that they would be so looking forward to actually following their own guidance that they would go ahead and do it. This would be congruent with what happened to cause the orphan rate hike that took place in a total vacuum last December, if you recall

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« Reply #145 on: June 26, 2016, 05:45:07 AM »

Fed on Hold Until 2017
Brexit prompts strategists to dial back expectations for interest rate hikes.

June 25, 2016
For conservative investors who own a chunk of government bonds, the Brexit vote was a market shock with upside.

Safe-harbor Treasuries soared as investors worldwide recoiled in shock that British citizens had voted to exit the European Union. The yield on the benchmark 10-year note (yields move inversely to prices) fell to a...

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« Reply #146 on: June 26, 2016, 08:42:34 AM »

JUN 25, 2016 @ 04:43 PM 1,719 VIEWS The Little Black Book of Billionaire Secrets
Brexit Makes That Federal Reserve Rate Rise Recede Into The Future

Tim Worstall ,   CONTRIBUTOR
I have opinions about economics, finance and public policy. 

Opinions expressed by Forbes Contributors are their own.
One of the odder effects of last Thursday’s vote by my fellow Britons to leave the European Union (Yay!) is to delay any future Federal Reserve interest rate rise in the United States. This isn’t quite what you would expect from a standing start analysis of the global economy. Britain no longer gets ruled by Brussels, why should this change American interest rates? But a side effect of this is that both the pound and the euro have fallen in value against the US dollar. Just as this is stimulatory to the British and European economies this is (marginally) contractionary for the US economy. Thus there’s little point, even it is contra-indicated, that the Fed should apply yet more contractionary monetary policy by raising interest rates. And thus the reason that a political decision thousands of miles away leads to an economic decision in the US.

As is said:

Market mayhem and the strengthening dollar following Britain’s decision to leave the European Union make it increasingly likely the Federal Reserve will delay plans to raise short-term interest rates.

Officials just a few weeks ago were looking at a move by their July 26-27 policy meeting. That now looks highly unlikely and a move at subsequent meetings becomes less likely, too, at least until it becomes clearer how events in Europe will affect the U.S. economic outlook.

The market mayhem part isn’t the important bit. That European markets go wild really isn’t something that the Federal Reserve is supposed to worry about all that much. It is, after all, part of the US system of governance, not the European nor global:

Britain’s shock vote to leave the European Union may tie the U.S. Federal Reserve to near zero interest rates for far longer than expected, according to new research indicating the U.S. central bank is now tightly bound to international economic conditions.

Over the past 18 months the Fed has blinked more than once, and refrained from raising interest rates when global market volatility has darkened the economic outlook, but the Fed has still maintained that U.S. monetary policy could ultimately “diverge” toward higher rates even in a weakened world economy.


inRead invented by Teads
Again, it’s not market volatility that is the point. It’s the movement of the dollar:

The severity of the fallout will become clear over three time horizons. On Friday, the Fed said it’s ready to act with its global central bank partners to shore up liquidity in markets, if needed. In the medium term, the post-Brexit market turmoil could delay a rate increase, while in the longer term, secondhand effects could bleed into U.S.

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The point is, quite simply, that a rise in US interest rates is contractionary on the US economy. It is also true that a rise in the US dollar exchange rate is contractionary on the US economy. These do not have equal effects of course. A 1% rise (that is, a rise of 1%, not a 1% of current interest rates rise) does not have the same effect as a 1% rise in the exchange rate. But they are both moves in the same direction.

An interest rate rise will , other things being equal (or ceteris paribus as the jargon goes) reduce investment in the US just at the same time as it increases savings. This will reduce aggregate demand. The exchange rate works differently, imports become cheaper, exports more expensive and these two also reduce aggregate demand. The size of the effects from an equal percentage change are different but they both work in that same direction.

So, if the exchange rate is already rising then one doesn’t raise the interest rate in order to achieve the desired or required amount of reduction of demand. This is before we consider the idea that a higher US interest rate will lead, again ceteris paribus, to more capital entering the US and thus pushing that exchange rate higher again.

This really isn’t about market mania, nor volatility nor even risk. It’s just standard macroeconomics. If the currency rate is rising then that is already contractionary upon the economy. And thus that other contractionary policy, raising interest rates, should be put to one side for the moment.

Brexit makes the Fed rate rise later and, when it comes, possibly lower. Rightly so.

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« Reply #147 on: June 26, 2016, 10:14:45 AM »

Goldman Sees A UK Recession, Shocked By A Fed "Tightening Cycle Unlike Any In Modern History"

Tyler Durden's picture
by Tyler Durden
Jun 25, 2016 6:27 PM
Starting off the year, Goldman was prodigiously optimistic, bullish... and dead wrong. Since then the bank has cut its rate hike forecast from 4 to 3 to 2 and, now in the aftermath of Brexit, it has just the excuse to say that "our forecasted path for the funds rate now looks quite unlike any tightening cycle in modern Fed history—one increase, followed by an extended pause, followed by gradual but steady increases over the subsequent three years." Which, quite simply, is another way for Goldman to say it was dead wrong. Again.

Here is how Goldman throws in the towel on the whole rate hike thing.

Tweaking Forecasts Following British Referendum
The decision of voters in the United Kingdom to exit the European Union will begin a lengthy process of negotiations with uncertain effects for both the UK and the rest of Western Europe. The trade linkages between Britain and the US are relatively modest (exports to the UK amount to about 0.7% of US GDP), so even in the event of a meaningful downturn, these spillovers are unlikely to derail US growth. Financial linkages are much tighter, however, and here we have already witnessed meaningful effects: our Financial Conditions Index (FCI) tightened by about 30 basis points (bp) today—enough to subtract around 0.2pp from GDP growth over the next year, if the FCI changes prove persistent.
As a result of the aftershocks of the “leave” vote on US financial conditions, we are downgrading our US growth forecasts for the second half of this year. We now expect GDP growth to average 2.0% in 2H 2016, down from 2.25% previously (see table below). The reduction reflects lower forecasts for business fixed investment spending in the months ahead. At this point we have not changed our forecasts for the unemployment rate or core inflation: we still see the unemployment rate averaging 4.6% in Q4, and core PCE inflation ending the year at +1.7%
A lower baseline outline for the economy as well as risk management considerations are likely to keep the Federal Reserve on hold for longer than we previously expected. Before the British referendum, we saw a 25% chance that the FOMC would raise rates at its July meeting, and a 40% chance that it would hike in September. We now see the odds of a hike next month as less than 5%—it would take a sea change in financial conditions and exceptionally strong economic data for the Fed to act so soon—and the probability of a hike in September of just 25%. Beyond September, we would assign about a 5% probability to a hike in November, and 40% to a hike in December. In other words, we still think the FOMC will raise rates this year, but probably not before December. Our modal expectation has therefore shifted from two rate hikes in 2016 to just one.
With these revisions, our forecasted path for the funds rate now looks quite unlike any tightening cycle in modern Fed history—one increase, followed by an extended pause, followed by gradual but steady increases over the subsequent three years. Although this pattern would be unusual, we continue to see a series of rate increases as more likely than the path for policy rates implied by market pricing. With the economy close to full employment and inflation firming, there will likely come a point at which the desire to support financial conditions and risk management concerns will no longer hold sway.

And in a follow up note released today, Goldman just cut its 2017 UK GDP forecast from 2.0% to 0.2%, as well as predicting a UK recession next year

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« Reply #148 on: June 26, 2016, 02:45:54 PM »

It is Not the UK’s ‘Leave’ Vote that Derailed the Fed’s Plans
By Paul Ebeling on June 25, 2016No Comment
It is Not the UK’s ‘Leave’ Vote that Derailed the Fed’s Plans
It is Not the UK’s ‘Leave’ Vote that Derailed the Fed’s Plans

Weaker-than-expected real growth in US jobs in recent months had forced US monetary policy makers to put off a rate hike at their meeting June meeting.

The data due early next month on June US NFP’s could help clear up doubts about the strength of the labor market, the political and economic consequences of Britain’s exit from the EU will take months/years to unfold.

Financial markets spoke in the hours since the ‘leave’ outcome. US stock  index futures dove and investors rushed for the safety of Gold and US Treasuries, pushing the yield on the benchmark 10-year T-Note below 1.5%, nearly a 4-year low, and the USD rose by more than 3% at one stage, the most in a day since Y 1978.

Interest rate futures markets rallied so hard that they have erased any probability of an increase in the Fed’s benchmark overnight lending rate for both this year, the next and perhaps the next.

They are pricing a possibility that the federal funds target rate may be lower in December than it is now, which is at 0.38% on average.

The following is the full text of a statement issued by the US Fed Friday following the UK’s vote to leave the EU, as ollows:

“The Federal Reserve is carefully monitoring developments in global financial markets, in cooperation with other central banks, following the results of the U.K. referendum on membership in the European Union. The Federal Reserve is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the U.S. economy.”

The Fed’s outlook suggests it will opt for caution.

A Brexit could “negatively affect financial conditions and the US economic outlook,” US Fed Chairwoman Janet Yellen said a few days before the referendum.

“Financial conditions could tighten,” said Fed Governor Jerome Powell said the day before the vote, adding that “global developments, global weakness … are really important for the setting of U.S. monetary policy.”

Neither gave any indication how big an impact the decision might have, and the Fed has no plans for an emergency meeting in the event of a leave vote, Ms. Yellen said this week.

The British departure from the EU deprives the 28-member EU of its 2nd-biggest economy behind Germany, and 1 of its 2 Key military powers, sending political shockwaves across the Continent.

Global events have  stayed the plans of the Yellen Fed, which will not/cannot to do anything to curtail the anemic recovery from a deep recession in Y 2008.

Have a terrific weekend

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« Reply #149 on: June 26, 2016, 03:00:02 PM »

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